mr. meyer discusses financial globalization and efficient banking regulation remarks by mr. laurence h. meyer, a member of the board of governors of the us federal reserve system, before the annual washington conference of the institute of international bankers in washington, dc on 2 / 3 / 98. the highly publicized recent events in the world ’ s financial system have served to make certain things abundantly clear. in particular, we now have further evidence that there is a large and growing disparity between the risk management practices of what might be called the “ best practice ” financial institutions and those of their competitors around the globe. this disparity, moreover, runs much more deeply than the weaknesses exposed during the asian financial crisis. in that event, bankers were seen to make the kinds of basic mistakes that have been oft repeated at other times and in other places. for example, loans were made to government - supported enterprises, either at the behest of the government itself or under the assumption that official support would be provided if the loans turned bad. at times, these loans were made to highly leveraged companies whose underlying financial ratios did not justify the origination of the loans on the terms under which they were made. to add insult to injury, the offending banks sometimes borrowed in dollars and lent in their home currencies, without hedging, believing that their government could and would continue to stabilize exchange rates. while these practices are troublesome, i am much more concerned with what i believe is both an exciting and disturbing aspect of the evolution of financial markets. spurred by improvements in computer technology and advances in financial theory - - most notably in option - theoretic models - - new financial products, as well as the markets supporting traditional banking products, are becoming ever more sophisticated and ever more global in nature. while financial innovation and globalization can only be applauded for their salutary impact on market efficiency, they present some difficult problems for market practitioners and, where the practitioners are regulated entities, their supervisors. today, i should like to concentrate on three themes, or principles, related to the evolution of financial markets : first, there exists a significant and dynamic connection running between market innovation and market regulation. financial innovation often occurs in response to regulation, especially when such regulation does not make economic sense. conversely, the evolution of regulation often is spurred by advances in the market. second, the globalization of financial markets means that mistakes in risk management made by one or more significant players in world markets

something nobler for our country. and our country will not, can not and should not be changed by either the imf, the world bank or the european union, but by us – you and me, and mr. vice - president and the ministers – today in their official capacity, and tomorrow as ordinary citizens. the aim of today ’ s launch and cooperation of the un and the nbs is getting the information through to companies operating in serbia about the global compact initiative, the largest global voluntary association dedicated to promoting socially responsible operations. the main reason for our participation in this project is not to support the launching of this initiative, but to learn something new and do something concrete together with the people who care about the future of our country and our planet. cooperation of the public sector, non - government organizations, and companies is not only possible but also indispensable, and i am convinced that much more can be done to the benefit of all the participants. our research has shown that in serbia today there is awareness of socially responsible operations, but more on conceptual level than in terms of concrete projects. what is lacking is the ignition spark, and i sincerely hope that today ’ s meeting will provide just that! there is a proverbial saying in our country that “ anything that can be bought for money is cheap. ” so, in that spirit, it is not only the privatization receipts that matter in the context of foreign direct investments, but also the companies ’ attitude to social responsibility issues which contributes to changing our country for the better. there are many companies in serbia that have not yet had any experience with projects promoting socially responsible behavior, but what matters is their good will to join in. many companies and institutions, including the nbs, are already engaged in many activities that can be defined as socially responsible : waste recycling on the site, free of charge training of the nbs ex - employees, financial support to handicapped children, etc. however, as members of the global compact we shall have the opportunity to share our experiences, to formulate our common platform and to become a part of a bigger family. and finally, let me be explicit : this is a voluntary gathering of people and companies – you have the opportunity but no obligation to join this initiative. you have no obligation but you have an opportunity to give, and give only as much as you think you ought to. you are not pressured in any way ; there is no obligation on your part other than strictly moral, which