expensive and difficult in practice to create an efficient competition across borders, as the suppliers of financial products must adapt their marketing strategies to each individual country. one might have believed that the internet would break this national fragmentation and open up the way for a demand - based international market for traditional bank services, but so far electronic banking services have mainly been used on a national basis. there are also numerous examples of tax systems discriminating between domestic and international financial transactions, which of course impedes the customers ’ incentives to use foreign suppliers, even if they offer more favourable terms for the actual service. integration contributes to greater welfare despite the difficulties in moving ahead more quickly with financial integration in the eu, there are estimates that it may be extensive enough in the future to make a contribution of more than one half of a per cent to gdp on an annual basis. the actual figure should perhaps not be seen as exact, but there is reason to expect an unequivocally positive connection between financial integration and real growth on the basis of the development trends observed so far. a larger market makes it possible to benefit from economies of scale and economies of scope. this means increased economic welfare for the financial system ’ s customers, provided that a sufficient degree of competition is maintained on the market and that there are efficient systems for supervision and oversight to ensure the stability of the system is upheld. if, for instance, european securities funds could operate under the same market conditions as american ones, they could become much larger than they are now. according to the same source as above, this could entail annual savings for european fund savers of 5 billion euro 2 close to 50 billion kronor! more diversified demand a more efficient supply also presupposes changes on the demand side. if the element of national thinking in financial investments were reduced, more savers would also be able to benefit from a broader supply of products. at the same time, it is essential that increased financial exposures towards companies and financial operators in other countries occur in controlled forms, i. e. with a high degree of transparency with regard to the risks attached to them. this is particularly important with regard to financial commitments of normally very long duration, e. g. investments in connection with life insurance. there is reason to believe that the demand for financial services will continue to be a driving force behind the integration process and give a basis for further structural changes in the financial markets. increased corporate financing through securities is one trend that will undoubtedly be further reinforced

on monetary policy “ mopping up ” after bubbles burst. or into whether monetary policy could be used to control asset prices as well as doing its orthodox job of steering nominal trends in the economy, which i should say can include taking account of prospective risks of inflation volatility over the medium term. ideas circulating already include minimum margin requirements or capital ratios that vary not only across firms but also through time as credit conditions change. we need calmly to explore whether there are also other possibilities. but let me make this absolutely clear : there are formidable obstacles to finding a solution. in the monetary sphere, a regime of floating exchange rates allows individual countries to pursue their own domestic monetary objectives. but in a world in which capital flows freely, local attempts to control the pace of credit creation, particularly within the financial system, may not work. all of that will need to be thought through. but first we need to concentrate on the immediate challenges. summary in a speech four months ago, i stressed that “ we must try to avoid a vicious circle in which tighter liquidity conditions, lower asset values, impaired capital resources, reduced credit supply, and slower aggregate demand feed back on each other ”. i identified monetary policy, liquidity policy, and regulatory capital policy as being amongst the instruments the authorities would need to use. that remains the case, as the stress in the global financial system has continued and, in the us at least, evidence of a feedback loop is apparent. each of those instruments is constrained in some degree. that underlines the need for close co - operation between the authorities and the industry, and internationally.