the larger firms and to those requiring more sophisticated financial services, alongside a handful of nationally controlled banks focusing mainly on delivering to the needs of the middle - market, while several dozen mutually - owned community banks are operating at county or large enterprise level, then this was my intention. it is subtly different from the present situation where the two big players are nationally controlled, with a handful of other banks – one nationally controlled, the others mnc subsidiaries but nationally supervised banks – present but somewhat reticent. and a very fragmented credit union movement. two of the banks are wholly state - owned – though the government is operating under relationship agreements ( agreed with the troika ) which limit the extent to which government intervenes in day - to - day operations of these entities. what role will state ownership have in the future? most likely, government will have no longterm interest in holding a controlling stake in any of the existing banks. indeed, it is likely to want to reduce its debt by disposing of its bank shares as quickly as is realistic. ( ideally, the capital needed to keep these banks going would come from a wider european fund, but that is a political debate at european level, to which i can make little useful contribution at this point. ) what about the vision of a government - sponsored business or development bank, which recently has come back into vogue? there is a long and chequered history of such entities, and a sizable literature evaluating their successes and failures. before the crisis the failures seemed to outweigh the successes by so much that few observers saw much value in reintroducing national development banks. ( as mentioned, our own two, acc and icc, were sold off to foreign concerns at the turn of the millennium. ) but the crisis and the sweeping failure of privately - owned banks has reignited the debate. one of the success stories is the german government ’ s kfw. perhaps through the current interaction between the irish government and kfw we will learn, in a hands - on way, more of what it takes to make a government - owned development bank a success. back to the future? was there a golden age of irish banking that we should hanker after? probably not. yes there was a century and a quarter after the munster bank episode of 1885 with scarcely a failure. but, though the banks were safe, they were even less adventurous than those in bis central bankers ’ speeches britain and lent mainly to commerce and the

lead to a sudden collapse of confidence in the ability of the deficit countries to maintain their external positions. the resulting disruptive adjustment would be harmful for the deficit and surplus countries alike and to the bystander countries as well. so far, this risk has not materialized and for the moment, the us bond markets do not seem to consider it particularly acute. the second risk is that the imbalances may give rise to tensions in global trade as well as exchange rate relations ; this risk is materializing constantly, as witnessed in the run - up to the seoul g20 summit. beyond these two main risks, the financial crisis exposed a number of more subtle channels of transmission through which global imbalances undermine global economic stability. in particular, the enormous growth of financial intermediation and innovation, related to the imbalances, combined with regulatory weakness, has made the international financial system much too fragile relative to the accumulated risks. also, the fragility of the international financial markets has led to a volatility of capital flows which may harm even fundamentally stable economies. easy and simplistic explanations of global imbalances have typically failed to stand the test of time. they may explain the most conspicuous developments in any one time period, yet fail to capture the multitude of relevant factors at play. it is therefore necessary to think of the imbalances as products of several fundamental factors, which lie deeper than the superficial level of macroeconomic policies. i will not go into these in great detail, but wish merely to mention a couple of rather general trends. the low pre - crisis national saving rates in deficit economies were supported by low borrowing costs and the consequent asset price boom during the period of “ great moderation ”. the low borrowing costs themselves reflected a number of reasons – from the “ global savings glut ” in emerging markets to failures in financial markets ’ risk assessments – and their relative significance certainly varies from country to country. but now, the economic structures of the deficit countries have adapted to the inflow of resources from abroad, and their internationally competitive sectors are smaller than they should be. the high saving rates in major surplus economies are largely driven broadly by two key factors. official sector savings derive largely from export - lead growth strategies based on asset - accumulating competitive exchange rate pegs combined with capital controls. private sector savings for their part are motivated by structural forces, including demographic trends, the lack of developed social safety nets and a still underdeveloped financial