in the wake of integration mirrors the decreased susceptibility to asymmetric financial crises at home. what can be done to intensify the effects promoting financial stability and to weaken those reducing it? to be brief, eu member states have to co - operate closely in financial market regulation, financial market integration and crisis management. only this can ensure that financial institutions, whose organisation and activities are more and more of a cross - border type, can be regulated and supervised in an appropriate manner. and this co - operation is indispensable for preventing regulatory and supervisory arbitrage. the eu ’ s approach in this context consists in bilateral and multilateral co - operation between national regulators and supervisors, which has been reinforced by the lamfalussy process, which represents a move from minimum harmonisation to the adoption of a level playing field. in the banking system, for example, the supervisory regime within the eu is based on three pillars. the first pillar can be described as harmonisation of minimum supervisory requirements and mutual recognition. the second pillar is based on the principle of national responsibility for the ( operational ) supervision of the financial institutions in question. the third pillar focuses on the co - operation between national regulators and supervisors. within the escb, central banks and banking supervisors work together in the banking supervision committee ( bsc ), which addresses mainly macro - prudential issues. at the eu level, co - operation has been intensified in the european banking committee ( ebc ), which is composed of finance ministry representatives, and in the committee of european banking supervisors ( cebs ), comprising banking supervisory authorities and central banks from the european economic area ( eea ), including the oenb. cebs is a so - called level - 3 lamfalussy - committee and particularly aims at achieving supervisory convergence and establishing supervisory networks in order to ensure efficient and effective supervision of cross - border banking groups. these efforts cover both day - to - day supervision as well as crisis situations, and for the latter purpose a joint task force has been established together with the bsc. co - operation in crisis management, for example efforts to minimize negative effects of financial crises, can surely be intensified. the second brouwer report, which had been commissioned by the council of economics and finance ministers, stated and confirmed that, above all, further improvements in information sharing were necessary. this proposal was taken up, for instance, in a multilateral memorandum of understanding on co - operation between the banking supervisors

klaus liebscher : financial deregulation in the eu – chances and challenges for financial stability speech by dr klaus liebscher, governor of the austrian national bank, to the 5th annual csi conference - “ new agenda of the wto : challenge and contribution of the european union ”, innsbruck, 18 november 2005. * * * ladies and gentlemen! it was with great pleasure that i accepted your invitation to again take part in the annual conference of the centre for the study of international institutions ( csi ). i feel honoured that the speech by the governor of the oesterreichische nationalbank has obviously become a traditional part of this conference. the liberalisation of trade in goods and services was at the centre of your discussions in the previous days. world trade is, after all, the most visible example of global economic integration. as a result of numerous trade agreements and tariff reductions, global exports have increased from one - tenth of world gdp in the early 1970s to one - quarter of world gdp today. a less visible, but even more dynamic recent phenomenon is global financial integration. some decades ago, the realisation of investment projects depended largely on the availability of capital in the local economy. meanwhile, both fund raising and investment occurs at an international level, which can be attributed mainly to the deregulation of capital movements. in the 1970s, worldwide crossborder holdings of assets amounted to only one - tenth of world gdp. now, countries have accumulated foreign assets equivalent to the annual gdp of the entire world. over the past 30 years, annual foreign direct investment ( fdi ) worldwide grew from around eur 8. 5 billion to almost eur 1 thousand billion – half of which is provided by the european corporate sector. at the same time, half of world fdi is invested in europe. for europe, these international linkages are of particular importance, and they illustrate that regional economic integration does not hinder global integration, but foster it. before taking a closer look at the european process of deregulation and integration, let me reflect a little on the objectives of financial integration : the integration of national financial markets, which used to be subject to entry barriers as well as different national regulations, practices and currencies, aims at fueling competition, reducing transaction costs and creating markets which are deeper, more liquid and more efficient. cross - border integration requires the removal of entry barriers, the convergence of legal, supervisory and fiscal conditions underlying financial markets, the harmonisation of financial standards