supervisory authorities and of its private agents and their associations to set and implement rules and codes of conduct that match the highest standards. with market globalisation and the free flow of capital, there is a real risk that a financial centre will become involved in illegal transactions against its will. i consider reputational risk as the major challenge facing financial centres at the beginning of this century. in switzerland this has long become conventional wisdom. know your customer rules have effectively been implemented and constantly adapted to the evolving requirements of the market realities for many years. swiss anti money laundering rules and regulations are widely recognised as expressions of the state of the art. i shall come back to this thorny topic in a moment. challenges ahead what are the challenges ahead? a ) market globalisation as i mentioned at the outset, the banking sector has gone through a period of heavy restructuring during the past decade or so. banking no longer amounts to simply accepting savings and granting loans. business has become increasingly complex and is dominated by a dwindling number of everlarger financial conglomerates. the trend toward concentration and the tendency toward onshore international banking can be observed in your country as in mine. the internationalisation of the banking business has led the large banks to establish major business units outside their home country. our banks create now more jobs outside the country than in switzerland. obviously, global business is the first challenge to be faced by the financial centres as well as by the authorities. a close co - operation between supervisors is essential. the trend toward financial conglomeration poses an additional challenge for the banking industry : the tendency towards “ all - finance ”. more and more providers not only offer banking services, but all types of other financial services as well, notably insurance products. a single supplier offers specific advantages to the customer while providers in turn expect synergies, customer loyalty, and lower costs. it is not yet clear whether this strategy will be a commercial success, and the question is heavily debated among specialists. what is clear, however, is that financial conglomerates are a challenge for the supervisors as well. today, banks and insurance companies are often governed by different laws and supervised by different authorities. the absence of consolidated supervision makes it more difficult to assess the combined risk of conglomerates. with the creation of the financial services authority ( fsa ), the united kingdom has taken the lead in this respect. the creation of an integrated financial supervisory authority is now also being envisaged in switzerland and in other major financial centres.

philipp hildebrand : review of the international financial system introductory remarks by mr philipp hildebrand, vice - chairman of the governing board of the swiss national bank, at the end - of - year media news conference, zurich, 10 december 2009. * 1. * * introduction at the news conference in june of this year we spoke of a gradual calming in the general financial market environment, although the outlook remains uncertain. since then we have seen a majority of banks returning to profitability. the horror stories being reported almost daily just over a year ago have now disappeared. it is very tempting just to go back to business as usual. however, we must not forget that – just over a year ago now – the international financial system was on the brink of collapse. support packages of an unprecedented size were being put together for the banks. exceptional monetary and fiscal measures were required to combat the dramatic plunge in the global economy – measures which have had to be kept in place to the current time. only by a narrow margin was a complete collapse of the financial system avoided and the danger of a major depression averted. this experience has clearly shown us all that the principle of sustainability needs to be a much more dominant element in the development of the international financial system than it was previously. this serves the interests of governments and taxpayers ; but it is also in the fundamental interests of the financial system itself, since it is not impossible that a future crisis could outstrip the resources of monetary and fiscal policy, thus rendering it impossible to rescue systemically important banks. 2. international approach consequently, there is broad international consensus between the relevant authorities on what the objectives of future regulatory measures should be. the financial stability board ( fsb ), in which switzerland is an active participant, has clearly formulated these objectives. the financial system must be brought to the point where it contributes to sustained economic growth. never again must it be allowed to combine such high risks with such minimal safety buffers. moreover, steps must be taken to avoid profits being privatised while losses are borne by the public at large. in essence, there are two ways of achieving this goal. the first approach is to adopt preventative measures aimed at reducing the probability of a bank collapse or a systemic crisis. this can be done by increasing safety buffers – for example, by imposing higher capital and liquidity requirements. the second approach is to take steps designed to reduce the costs of a crisis once it has already occurred. 2. 1 prevention at the