market transparency experience shows that uncertainty and incomplete information are determining factors in mimetic behaviour. these shortfalls in market transparency make mimetic behaviour seem rational to agents, who prefer to follow bigger participants, who are thought to be better informed, rather than develop their own analysis. strengthening transparency therefore continues to be a priority. one of the objectives of transparency is to enable better differentiation of borrower creditworthiness. a key feature of mimetic behaviour is that all borrowers are " tarred with the same brush ". so when one emerging economy encounters difficulties, all neighbouring countries, or countries that share common characteristics, are treated in the same way – regardless of their actual economic and financial situation. the same applies to businesses operating in the same economic sector. transparency has substantially increased since the asian crisis, thanks to a solid global consensus. let us continue and reinforce these efforts. take into account the medium and long - term perspective of some market participants some investors, such as pension funds and insurance companies, have to invest funds in order to enable their customers to build up wealth over the medium and long term, notably in preparation for retirement. consequently, these types of investors are supposed to behave differently from traders and short - term investors, who are working on a very different time horizon. but at times it seems that they are all pushed to behave in much the same way, on the basis of a very short - term horizon. to preserve, and even restore, their specific investment approach, these investors might be more shielded from excessive short - term pressures. this objective raises considerable difficulties, because it touches on the way in which the performances of medium and long - term funds ( including pension funds ) and life insurance companies are assessed. in other words, this objective concerns the accounting standards and practices they use. it implies that some rules and standards would be adapted to the medium and long - term horizon used by these entities. i have no answer at this stage. i am only asking the question. diversify the risk management tools of financial institutions as i mentioned earlier, even the best techniques can have adverse effects when used by too many participants. to some degree, this is perhaps what has happened to value - at - risk based techniques, which have been massively adopted by the financial industry. because they use more or less similar parameters and suffer from the same weaknesses – for example, they took inadequate account of market liquidity at the time of the 1998 crisis –, such tools tend to give con

##verging signals to those that use them. they thus encourage the mimetic behaviour that i discussed previously. the fact that some market participants are more sophisticated than the average is a guarantee that standardisation will remain limited, since they will develop techniques that are little used by others. in this respect, i must stress that the basle committee, as illustrated by the new capital accord, is encouraging banks to use more sophisticated and accurate risk measurements techniques. in addition, supervisors might help – and obviously they are already helping - to spread the idea that financial institutions should round out their current range of risk management tools to include extensive use of stress testing. this technique offers a better reflection of the varying situations of institutions and of the diverse perceptions that institutions have of exceptional events. the application of stress testing techniques and their results are thus inherently more diversified than those resulting from methods based on the value - at - risk approach. these are only examples of options to help improve the functioning of markets. there is probably some merit in an overall review of regulatory, accounting and tax rules and regulations, as well as of codes of good conduct and good practices, and of structural developments of market themselves, to identify possible amendments and improvements that could help protect and enhance the behavioural and conceptual diversity of modern financial markets. in conclusion, let me stress the important role played by central banks in preserving monetary and financial stability in an increasingly globalised world. the recent years have shown the benefits of monetary stability in terms of growth in a globalised world. it is of course closely linked to central bank ’ s independence, which is no longer a matter of debate. financial authorities are nevertheless faced with a new challenge, which is to strengthen financial stability in a context of amplified financial cycles. i would like to stress what i feel is the highly complementary nature of price stability and financial stability objectives : price stability is the bedrock on which financial stability is built. central banks have a undoubtedly special responsibility due to their position at the heart of financial systems : · they contribute directly to supplying liquidity to the economy, · their close and constant contact with credit institutions gives them a thorough understanding of banking systems, · they contribute to banking supervision, · last but not least, central banks are responsible for a safe and efficient functioning of payment systems and, at least for some of them, of securities clearing and settlement systems. i thank you for your attention.