with the lead supervisors of the major global financial institutions and market infrastructure operators. over the past few years, we have initiated targeted reviews, aimed at improving the sophistication of stress testing practice, counterparty credit risk management in otc derivatives, structured credit, and hedge funds, and the post trade processing infrastructure in the otc derivatives markets. we are also looking carefully at liquidity risk management practice and the management of the bridge exposures institutions run in leverage lending, leveraged buyout and merger and acquisition financing, and credit activities more generally. these initiatives are designed with several important features : first, to bring more evenness to the incentives faced by the major global institutions, through closer cooperation across supervisors within the united states and across countries ; second, to foster more agility in the supervisory agenda, and a capacity to adapt to change that more closely matches the rapid evolution in market developments ; and third, to try to encourage market - led initiatives, reinforced rather than imposed by supervision. the careful work of counterparty credit risk management policy group ii led by jerry corrigan – with the supervisory initiatives i referred to is an example. today, 18 global banks outlined another set of commitments to reduce settlement risk in the equity derivatives market. this approach to supervision is designed to look ahead to try to ensure the adequacy of capital and liquidity, and the sophistication of risk management discipline relative to risk, over time and at all points in the cycle. i outlined earlier the reasons why monetary policy has only limited capacity to deal preemptively with financial bubbles. similarly, i see little prospect that supervision will have the capacity to identify and address potential concentrations in exposure to individual risk factors, whether through changes to capital charges or other means. focusing on the quality and strength of cushions against tail risk is the best way for supervision to be countercyclical rather than procyclical. the subtitle of your conference is, i believe, “ where ’ s the risk? ” and as this implies, there is still substantial interest in markets and official circles in finding ways to use greater transparency to improve the capacity of markets, and supervisors, to try to address emerging risks early, to let the air out of crowded trades and concentrations of leverage or risk before they reach potentially troubling proportions. we will continue to explore ways to improve the quality of public disclosure by financial institutions, and other sources of information on financial activity. but we do not have the capacity to

as important as keeping unit labour costs under control. portugal ’ s apparent inability to compete as successfully as ireland is indeed largely attributable to relatively rigid product and market regulation ; insufficiently market - friendly policies ; relatively low levels of educational attainment, of r & d expenditure and of information technology use ; and not enough wage and price flexibility. these contrasting outcomes clearly demonstrate that joining the euro area does not on its own provide a guarantee of sustainable growth and that the full benefits of monetary union can only be enjoyed if a country adopts appropriate economic structures and policies. bridging the income gap with the euro area in a maltese context the pursuit of excellence implicit in the irish model requires in the first place a change in mindsets and behaviour that would allow us to arrive first at a common diagnosis of the obstacles to faster growth, and then at an equally consensual identification l. bini - smaghi, real and nominal convergence : policy challenges, speech delivered at the conference on european economic integration 2007 – currency and competitiveness, oesterreichische nationalbank, vienna, 20 november 2007. of the means to overcome them. the ability to achieve a social compact was incidentally another no less vital ingredient of the irish success story. in the absence of a consensus, however, strong leadership would be required in order to explain the need for hard measures to the population and to isolate vested interests standing in the way of the needed reforms. whatever the approach adopted, maximizing the benefits of malta ’ s participation in monetary union will require the removal of the remaining impediments to growth. in the public sector, fiscal consolidation must henceforth involve a greater emphasis on expenditure reduction, particularly in view of rising pressures caused by aging - related factors such as pension and health care costs, and on securing more “ value for money ” and greater accountability in the use of public funds. the provision of free public goods and services regardless of the beneficiary ’ s ability to pay needs to be reassessed as it leads to waste and to a higher tax burden, besides being inequitable. the same applies to subsidies, whether implicit or explicit. the resulting distortion of incentives and inefficiencies is both unsustainable and incompatible with the fiscal discipline required in a monetary union. an important contribution to enhancing the economy ’ s competitiveness can also be made by new forms of employment security and by further improvements in labour market flexibility. with regard to the former,