, as the sense of urgency imposed by the crisis has vanished. on the global financial reform front, for instance, progress has slowed down in several respects. this has generated frustration and led to country - specific regulatory initiatives. these initiatives should not create market distortions, harm global and european financial integration or lead to regulatory arbitrage. progress on the front of global economic policy - making has also slowed down. the g20 ’ s effectiveness is now being questioned. being larger than the g7, it is also more heterogeneous in terms of values and represented interests. therefore, reaching an agreement at the negotiation table is more challenging. also, the g20 might appear distant to citizens, which is not helpful for legitimacy, as the latter is intrinsically linked to local proximity. finally, not all countries are at the table. an entire continent like africa is only represented by one country, namely south africa. despite its limitations, the g20 remains essential for global economic cooperation insofar as there is no obvious alternative. returning only to the g7 or the g8 is not an option. at the same time, it was premature to conclude that the former formats are dead with the rise of the g20. the conclusions of this week ’ s g8 summit in northern - ireland on fighting tax evasion and on world trade for example showed that the smaller formats can stimulate important momentum for the g20 and other fora like the wto. where do we stand on the european front? an essential lesson from the crisis is that the economic and monetary union is an incomplete project. the “ four presidents ” report outlined the necessary steps to move towards a genuine monetary union, which i strongly support. first, we need to complete with great urgency the banking union. we need a clear and transparent assessment of the conditions of the banking system ( “ asset review ” ) before the single supervisory mechanism takes over. we also need a strong commitment towards an effective single resolution mechanism ( srm ) which is an indispensable element of the banking union and a necessary complement to the ssm. the srm would allow for a smooth winding down of banks, especially those with large cross - border activities. it needs to entail both a strong single resolution authority ( sra ) as well as a single resolution fund ( srf ). the latter should be financed with ex - ante risk based levies on the banking sector. these arrangements would enhance the credibility of the system and ultimately

for commodities. the latter shift has also been encouraged by regulation : many european countries allow such insurance to count as regulatory capital under the basel iii rules. bis central bankers ’ speeches implications so far, i have given you a thumbnail sketch of the changing trends in the financing of commodities markets. but why do these developments matter for the world economy, and particularly for canada? here, i would like briefly to highlight three sets of issues. first, there may be implications for the pricing of commodities. as i have stressed, the broad trends in commodity prices is determined by the fundamentals of supply and demand – notably the long - term growth in demand from asian emerging - market economies. but the functioning of the markets in which commodities are traded has the potential to influence pricing in several ways. the flows of financing for commodity trading activities can affect the liquidity and efficiency of these markets and thus the extent to which prices reflect those fundamentals. as well, the financialization of commodities has the potential to affect the degree of short - term volatility of the markets. although it is too early to assess the implications of the recent changes in financing patterns i have been describing, these developments bear watching. a second set of issues pertains to systemic risk. in particular, the large trading houses, together with the physical trading operations of some large investment banks, are playing an increasingly prominent role in a number of commodity markets. this raises the possibility that some of these institutions are becoming systemically important. just as the 2008 financial crisis revealed the need to assess the systemic importance of institutions that play a central role in particular financial markets, we should be asking the same questions about institutions that are interconnected with various commodity markets. here, i have two general questions in mind : could the failure of one of the large trading houses cause serious disruption in the commodities markets in which it played a market - making role? and, could the losses that a trading house incurs through the positions it has taken in commodities have significant knock - on effects on the financial system? we are far from having answers to those questions, but they need to be addressed. third, commodities trading can potentially be an important link between the financial system and the real economy. with the financialization of commodities, financial system stress has the potential to affect commodities markets. commodities markets, in turn, have an important influence on the economic outlook of a commodity - rich country such as canada. moreover, movements in commodity prices may pose risks to the financial