error! unknown document property name. “ on the right track : why is the capital markets union important and how do we get there ” speech by governor knot at the omfif - dnb conference ‘ developing european capital markets ’ 3 november, 2020 error! unknown document property name. let me start by thanking you all for being here today. if you travel by train from the city of bordeaux southward to spain, at the border you will have a slightly strange experience. since the rail gauges in france and spain are of a different width, the rail bogies, that ’ s basically the wheels of the train, have to be replaced. a very heavy machine lifts the train up, the bogies are rolled away and replaced by others. it takes about one hour before the traveler can resume his or her journey. this rather remarkable example of systems that do not fit together, and that reminds one of the nineteenth century, is not uncommon in european capital markets. this becomes clear if you compare it with the united states. consider a us investor located in iowa who wants to invest in a firm located in florida. information on the firms finances can be readily accessed via the securities and exchange commission, while securities and insolvency law are of course similar across states. now consider the same process for a belgian investor aiming to invest in portugal. firm information is scattered across business registries, while the investor has to accustom itself to various local rules. this goes from small discrepancies, such as rules on shareholder disclosure, to large differences, such as insolvency laws. whereas large areas of the european economy have become more and more integrated, capital markets in europe are still fragmented to a large degree. this results in real costs. the capital markets union has clearly moved on from being a ‘ nice to have ’ to a ‘ need to have ’. why is a unified european capital market important and how do we get there? that is the topic of today. i think the importance of this topic is already reflected in the quality of speakers on the agenda for today. so allow me to thank all the speakers for being here, and i look forward to our exchange of insights and ideas. being the first speaker, my aim is to set the stage for a fruitful discussion in the later sessions. in my remarks today i will first briefly share my view on why the capital markets union is so important. as the potential benefits of the cmu are numerous, i will stick

the anchor currency of an asian exchange rate system. the obvious potential candidate in the long run is china, but china does not presently maintain a convertible currency and does not have a forty - year record of economic and monetary stability the way germany did by the end of the 1980s. 4 and, as noted above, china has its own adjustments to make for some time ahead, in which others in the region might not want to share. hence it seems unlikely, to me, that an asia - wide exchange rate policy is likely any time soon. most likely exchange rate policies will continue to be made with reference to the us dollar for a while yet. to the extent there is'co - ordination'it will be accidental, as a result of similar activities by various countries directed towards managing exchange rates against the us dollar – with an eye, of course, on what their neighbours are doing. it would follow from this that the likelihood of a system of closer co - ordination in which domestic policies are allowed systematically to be affected by regional exchange rate concerns is pretty small. it further follows that the prospect for monetary union is quite remote indeed. apart from the likelihood that some countries'real exchange rates will need to move a lot over the next twenty years to an extent that could be painful under a system of irrevocably fixed nominal rates, monetary union is a political as well as an economic decision. indeed, for europe, it was overwhelmingly a political decision ( which is not to say it was wrong ). you would all be able to judge better than i but my guess is that asia's political leaders are nothing like ready to make such a decision involving ceding sovereignty to a supra - national institution. that is not to say that there is not a lot of worthwhile co - operative work to be done. on the contrary, i think that there is much value to be gained by pursuing type 3 co - operation : working on making the financial infrastructure reasonably consistent, well understood and easy to use for investors across the region. the reason for this is only partly to foster cross - border activity ; it is also, in my view, because it is in the interests of each of these countries to have well - functioning ( local currency - based ) markets. this is much less glamorous than talking about regional exchange rate initiatives, but for some time ahead at least, is likely to have more pay - off. i do not wish to speak against sensible thought being given to more