single market in financial services should contribute to the emergence of a healthier financial system in the accession countries. now it could of course also be argued that the extension of the “ single passport ” to most aspects of the provision of financial services foreseen by the financial services action plan could well expose the accession countries to new risks, particularly those emanating from within the eu itself, with which caviglia, g., krause, g & c., thimann. 2002. key features of the financial sectors in eu accession countries, in financial sectors in eu accession countries. ed., c. thimann c. frankfurt : european central bank. claessens, s., demirguc - kunt, a & h. huizinga. 1998 ( rev 2000 ). how does foreign entry affect the domestic banking market? world bank working paper no. 1918. washington : world bank. these countries are already closely integrated. indeed, the ecb has itself recently stated that the integration of financial markets in the region could increase the chances of systemic disturbances affecting more than one member state. in this regard, dr buch ’ s paper on the implications for financial stability of foreign bank entry should help to place the discussion in an empirical context. another important aspect of financial market integration relates to regulation and supervision. as the process intensifies, the distinction between different types of financial institutions and markets will become increasingly blurred. in such a scenario, it will be even more important for all institutions with financial stability responsibilities - be it the central bank, supervisory authority or other government agency - to co - ordinate their efforts in the area of system oversight and to share any information which could be relevant to the proper fulfilment of their respective functions. indeed, whereas until recently the prevailing concern related to the choice of institutional arrangement for the supervision of the financial sector, it is now sometimes argued that it is not the institutional framework which matters most, but rather the existence of adequate mechanisms guaranteeing the exchange of information and policy co - ordination between the entities responsible for overseeing systemic stability and those that monitor the health of individual financial institutions. beyond that, it is claimed, any institutional set - up can work. likewise, any one can fail. while this conclusion might be valid from a national point of view, it does little to address the question of whether information exchange and policy co - ordination relating to financial sector developments affecting the eu as a whole would be

perspectives on these issues. the relevance of transparency and good governance also applies at the corporate level, not least because financial difficulties in large corporations could undermine the well - being of individual financial institutions and markets. this is especially the case in small jurisdictions. now it is a fact that corporations will always know a lot more about their financial position than any outside entity charged with monitoring them, and financial intermediaries are no exception in this regard. this is particularly true at a time when the complexity of financial products and the intensity of cross - market risks are stretching the capacity of central bankers and supervisors to remain fully in control. several recent episodes in the financial world indeed confirm that the innate human predisposition to maximise selfinterest can induce behaviour that is not in harmony with the public interest. the implications of this are two - fold. while rules and regulations continue to play an important role in preventing systemic shocks, they will increasingly have to incorporate incentives and credible deterrents to discourage excessive risk - taking and moral hazard. second, the efforts of central bankers and supervisors need to be supplemented with direct oversight by the stakeholders of financial institutions themselves, be they shareholders, creditors or customers. stated otherwise, good governance and market discipline are becoming at least as important as prudential controls for the well - being of the financial system. that, in turn, calls for a host of other measures ranging from the regular disclosure by the institutions of detailed information about their performance and the adoption of international accounting standards to the enforcement of shareholder rights, the creation of deposit insurance and investor protection schemes and the simplification of judicial procedures. in this regard, i believe that dr summer will be explaining how accession countries score in terms of some of these criteria. eu financial market integration presents new opportunities but also some risks while it is recognised that the well - being of the financial system has come to depend on a host of factors, the regulatory and institutional framework in place continues to play an important role both in crisis prevention and management. the prospect of eu membership has already contributed significantly in this regard, spurring accession countries to evaluate the adequacy of the framework governing the financial sector. perhaps more important is the fact that the on - going harmonisation of rules and practices with eu standards in the area of financial stability will provide market players with an added assurance that this framework will continue to evolve in line with international best practice. this assurance should also facilitate the further development of the financial sector in these countries, as foreign