have the findings of the review that is currently underway of the processes and procedures. it would seem reasonable to me to await this before embarking on another major assessment. ladies and gentlemen, before i close, let me make a couple of brief remarks on the nexus between financial integration and financial stability. you are undoubtedly aware that only a few weeks ago, we witnessed the largest ever loss incurred by a hedge fund, 6. 4 billion us dollars, suffered by the usbased fund amaranth advisors. fortunately, there was little market disruption. i mention this, because this episode should serve as a solitary reminder that the channels through which financial innovation, development and integration can potentially affect the financial system ’ s resilience are manifold, diverse, and complex. one could expect financial integration to affect financial stability in two directions : on the one hand, there is an increased risk of contagion and a larger exposure to common shocks ; on the other hand, there are more opportunities for funding as well as for risk - sharing and risktransfer. the net effect is difficult to gauge. in my view, it is likely to be positive for the stability of the financial system. what is certain, however, is that, in the case of banking strains, the likelihood that they will remain confined within domestic borders is less in comparison with the past. therefore, it is necessary for the supervisory framework as well as for the arrangements for financial stability in the eu to be able to cope effectively with the management of a possible crisis of crossborder banking groups. these issues are a central main topic of discussion at the moment in the policy - making circles in the eu and, indeed, globally. in europe, a lot of progress has been made in clarifying the roles of, and the procedures to be followed by, the competent authorities ( central banks, banking supervisors and ministries of finance ) in crisis situations. in addition, the degree of preparedness of the authorities to manage a situation of stress can be enhanced through crisis simulation exercises. however, there are other areas, such as deposit insurance schemes and the winding - up of financial institutions, where there is room for regulatory intervention at the eu level. reflections on possible legislative proposals in this regard are underway. the general conclusion from all these observations is that any future modification to the supervisory framework should follow a holistic approach, carefully considering all the implications of any such change for all the components of the financial safety net. the stakes are indeed high, as

jean - pierre roth : economic prospects for 2005 in a subdued european environment summary of a speech by mr jean - pierre roth, chairman of the governing board of the swiss national bank, at the “ les rencontres au chateau ” meeting, sierre, 22 february 2005. the complete speech can be found in french on the swiss national bank ’ s website ( www. snb. ch ). * * * although the swiss economy expanded by almost 2 % in 2004, this was not sufficient to reduce unemployment significantly. hopes for an improvement in this respect are thus focused on this year. however, they might unfortunately remain unfulfilled once again. at the end of 2004, there were already signs of a slowdown in growth caused by the weak dollar and persistently high oil prices. these factors also played a key role in the national bank's decision to leave interest rates unchanged. overall, the international economy developed in line with expectations during the first two months of 2005 : the us and asia saw further growth, while europe was confronted with increased difficulties. the us economy is burdened with high budget deficits and the current account deficit. in asia, the chinese economy is booming, whereas japan is still struggling to find its way back to the growth path. the monetary situation in asia, too, appears less than stable. in europe, the economic environment presents a rather dim picture. germany, italy and the netherlands are expected to see rather modest growth, while the outlook for france is more upbeat. the uk is the exception : since the mid - 1990s, the country has emerged as the growth model for europe. for switzerland, the sluggish development in europe is especially regrettable, as the swiss export sector usually serves as the engine for economic recovery. all in all, switzerland's export industry is well positioned to benefit from higher demand from abroad. switzerland has been able to reduce its production costs per unit in the past few years, and the swiss franc even depreciated slightly versus the euro since the launch of the single currency. as regards domestic demand, consumer sentiment remains satisfactory overall, but this should not be expected to stimulate growth decisively. while construction activity is robust, it has lost some of its momentum. investment in equipment is still brisk, and the recent modest slowdown should not last too long. on the whole, the swiss economy is still on its growth trajectory, but it lacks stimuli from abroad. this situation is the same as the one underlying the