financial markets that already has taken place or is likely to come in the near future. let me next turn to the debate about the european regulatory framework. the economic and financial committee ( efc ) has only recently provided an assessment of existing arrangements in the brower report. a central result of this assessment was that the current framework that strongly relies on national responsibilities is appropriate. the report found that there is at the same time a need to enhance arrangements for cross - border and cross - sectional co - operation, to improve the alignment of supervisory practices and to reinforce the collaboration between supervisory and central banking functions. i want to point out that developments have already started that implement some of these recommendations. let me just mention the activities of the banking supervision committee ( bsc ) of the european system of central banks ( escb ). these activities strongly rely on the close cooperation between central banks and banking supervision authorities. not only in the area of banking supervision, but also in recent attempts to implement the lamfalussy recommendations in the field of security market regulation considerable progress has been made. consistent and efficient implementation of regulatory rules has been promoted by new institutional arrangements delegating rule - making powers to a committee or regulators whereas implementation at the national level is undertaken through a committee of supervisors. these two examples, which i have briefly touched here, illustrate that initiatives are under way and debate is ongoing. however, not all of the recommendations of the brower report have been implemented and many other issues still need further investigation and debate. but developments show that we are heading in the right direction. i have argued that policy makers and central banks are well aware of the regulatory challenges for european financial markets. they have already tried to find some practical answers to these challenges. these answers are based on the principles of national responsibility, transnational co - operation and the close involvement of central banks into the supervision of the banking system. clearly, many issues in this process are still open and need further discussion. but i am sure that your conference will make an important contribution towards a deeper understanding of those issues and to point out directions, where further activities are needed. cepr / esi price for the best central bank research paper ladies and gentlemen, it is a great pleasure now for me to announce the winner of the newly established cepr / esi prize for the best central bank research paper. this price shall promote high - quality research at european central banks, both within and outside the eurosystem. it is important to acknowledge research

klaus liebscher : regulatory challenges for european financial markets opening address by dr klaus liebscher, governor of the austrian national bank, at the cepr / esi annual conference : “ regulatory challenges for european financial markets ”, vienna, 20 september 2002. * * * ladies and gentlemen, it is a great pleasure for me to welcome you all to the conference “ regulatory challenges for european financial markets ” hosted by oesterreichische nationalbank. i am particularly grateful to the centre of economic policy research ( cepr ) and professor eijffinger, dr. hochreiter and professor koedijk who have organized this academic conference with a highly interesting selection of papers on a very important topic. the financial system fulfils several essential functions for the performance of the real economy. it plays a crucial role in the allocation of resources by channelling funds from households to enterprises, it provides risk - sharing opportunities for households and firms and it helps agents to economise on transaction and information costs. an economic environment in which these functions can be fulfilled smoothly and efficiently is therefore essential for the welfare of an economy. the accelerating process of european integration has abolished various obstacles that were previously in place because of national boundaries and different legislations. and the development of a single financial market in europe has led to a situation where the financial system can fulfil its core functions much better than it could fulfil them two decades ago. this integration process has been accelerated and reinforced by the introduction of the single currency. its success has supported the process of financial market integration and structural change. there are good reasons to believe that we are only at the beginning of this process. but financial market integration by itself is not enough to guarantee that the financial system can fulfil its functions efficiently. it has been clear to economists and policy makers for a long time that financial markets can only work smoothly and efficiently, if they can rely on a complementary legal and regulatory infrastructure. thus the economic integration of european financial markets has to be accompanied by the necessary adoptions of regulatory frameworks and regimes. the topic of the conference is therefore a very important one. the problems that arise in this process are a big challenge for supervisors and regulators. they are also a challenge for central bankers because central banks are traditionally among the institutions closely involved in the supervision of the financial system. the regulatory challenges for european financial markets arise from a combination of necessary adaptations to general technological developments such as, for instance, electronic money - an