##s will then mainly be due to the differences in the standing of the issuers and the differing liquidity of the issues. higher demands will be placed on public sector national debt management because currency will no longer act as a “ screen ”. even now, the globalisation of the financial markets is calling for a widespread application of international standards. the euro is likely to encourage that trend. a reliable political regulatory framework and an efficient structure in the national financial markets will then become crucial assets in competing for capital that is in short supply. what implications do these developments have for the european financial markets? at present, there are still a large number of stock markets and futures exchanges in the european union which have a wide variety of market models and trading systems. as in the financial industry as a whole, the pressure of competition and advances in communication technology will lead to a process of adjustment and concentration. but the debate on the future of europe ’ s financial centres is also connected with questions concerning the set of instruments that the european system of central banks will have at its disposal. the bundesbank attaches great importance to the monetary policy strategy including the instruments belonging to it - being implemented in a way that leaves competition unaffected, and which does not discriminate against any financial centre in the euro area. we do not want any privileges for frankfurt, but we do not want any disadvantages either. along with the national central banks, which will carry the main weight of operational activities, the european central bank must itself have its own limited field of operations. that is because, from our point of view, competition between the stock market centres and trading systems which are not bound locationally is the best means of finding the appropriate financial market structure for the larger currency area. the greater breadth and depth of the euro market compared with the former national markets can also bring new business, of course. the euro - especially if it is enduringly stable - is likely to be particularly attractive for internationally operating demanders and suppliers of capital. the euro, however, will still first have to earn its position in the portfolio of public and private investors by competing with other currencies. in saying that, it ought to be beyond dispute that a euro which is weak inwardly in terms of its purchasing power will not be able to take a leading position externally. for that reason, too, safeguarding monetary stability is a perpetual challenge for the euro. v policy makers must now create confidence by taking credible decisions so that the general public and the

and all that in 20 minutes. in light of such incidents some have argued that post - crisis regulation has put pressure on banks to quit activities, which led to reduced liquidity, thereby increasing the likelihood of extreme price swings. this logic provides the basis for some people ’ s demand for a redesign of regulation. regulators are carefully monitoring the micro - and macro - prudential implications of the reforms. however, any analysis and recommendation would have to recognise that a reduction in the trading activity of banks was a genuine intention of the post - crisis reforms. we therefore need to weigh up concerns about liquidity against reduced trading activity. to put it bluntly : yes, markets are going to be less conducive for the generation of quick profits, but that was what was intended by the reforms – what we very much need are informed and committed investors, not short - termism. this will strengthen stability. but that is also why banks need to adapt to the new environment. while the banking sector has been shaken, business models have not been stirred – that is, only few have been overhauled. some stirring, however, might not hurt. and, here, it is market forces, rather than regulatory forces that come into play. what i mean is that banks must apply the acid test to their business models. especially european banks are lagging behind in redirecting their strategies. against the backdrop of changed market structures and in a low interest rate bis central bankers ’ speeches environment – which is, in all likelihood, here to stay – banks must urgently rethink their strategies to survive. i cannot emphasise enough how pressing it is for banks to assess and adapt their business models. but let me also stress that it is not the task of supervisors to intervene in the strategic orientation of banks. we have a public mandate to put a stop to imprudent activity with the aim of securing a stable banking sector that serves the real economy. therefore, we tax and limit negative externalities. for example, in addition to what i have already discussed, legislation and regulation of banking structural reform – also known as “ ringfencing ” – is under way in the us, the uk, and the eu. the regulations will ringfence those segments of banks that deserve particular protection, in particular deposits. this is designed to internalise negative externalities and reduce moral hazard. banks will have to accept the new public framework and construct sustainable business strategies which are compatible with it and which may restru