. though not under any identifiable threat, maltese banks should build on their existing strengths by reinforcing their capital base through the retention of a greater proportion of earnings ; and, as domestic economic conditions are expected to weaken, loan loss provisioning levels may also need to rise. the current crisis will not be over until confidence and trust are restored, and the credit channel starts to function fluidly again. this requires greater transparency and a recognition that a sound financial system is one that practices the traditional banking values of integrity and faithfulness. some of you might recall that these values were captured in the motto of the chartered institute of bankers, “ probus et fidelis ”. it is perhaps a sign of the times that the institute ’ s current logo of two overlapping arrows is, we are told, all about its core value : winning, a value which some market players have pursued with excessive zeal with the calamitous results we all know. it is just possible that we might not have been where we are today had the old, but tested values continued to prevail.

it is also necessary to have an interplay between the central banks and supervisory authorities to implement existing regulations in a good manner. and the more integrated the financial sector becomes within the eu, the larger the number of people who will potentially be affected by such tensions or crises, which will make further demands for well - oiled channels for monitoring between different countries and concerning different types of financial activities. this involves not merely having good systems for mutually providing information on what is happening when things are going smoothly, but also maintaining a readiness to identify problems and intervene in acute crises that might arise and that could threaten the stability of the system. it is complicated to build up this kind of readiness when it comes to authorities in different countries with different traditions, different principals, responsibility for different parts of the financial system, etc., but it is nevertheless extremely important that the network co - operation in this field be developed further. new requirements for co - ordination in supervision and oversight the basic model for financial supervision within the eu is that it shall be carried out by national authorities and this is, in my opinion, the most natural and efficient means of keeping a watch over financial operators and markets. however, this requires that the supervision of other operations and markets that can affect financial conglomerates is also sufficiently co - ordinated. within the eu a discussion has come up as to which type of authority is best suited to exercise supervision of the financial system : the central banks with their overall responsibility for the safe and efficient functioning of the payment system, or independent financial supervisory authorities, which are not involved in monetary policy decisions that can have consequences for individual institutions. in sweden we apply the latter model, which i consider to work well in our environment. on the one hand, the risk of a conflict of interests between monetary policy decisions and supervisory decisions will thereby be avoided, and on the other hand it provides scope for a co - ordinated supervision between financial operations pursued in different institutional forms, e. g. banking and insurance, within financial conglomerates. other eu countries have other models and there are also ambitions from some quarters to change the division of responsibilities. in my opinion, there is no reason to settle for a particular institutional solution for the supervisory work ; it is more important to ensure the good functioning of the arrangements that apply. a larger issue that might have institutional consequences is whether it is sufficient in a more integrated eu to rely on co - operation and co - ordination between national authorities or whether a controlling authority is needed