inflation process in the advanced economies, including in the euro area. it has contributed to a lower worldwide inflation rates in recent years. the questions of how big this dampening effect has been, and whether it will persist going forward, are among the most important and hotly debated questions in central banking. international finance next, i would like to discuss briefly another main theme of the conference, that of international finance. first, i want to acknowledge upfront that the causal link between financial integration and growth is far from being straightforward. however, it seems irrefutable that better allocation of global resources allowed by deepening financial integration has been an important factor in supporting global growth. the role of the emes has increased in international finance. many emes have also made great strides in developing their domestic financial markets, but much remains to be done. here i want to underscore the need to proceed with caution. this is because capital market liberalization involves not only benefits but also risks, both to countries in question and investors that invest in these countries. we have ample experience of how things can go wrong, for example, the asian crisis in the late 1990's, and the series of crises in latin america around the turn of the millennium. and, also finland has first hand experience from a severe banking crisis that took place less than 20 years ago. there are many lessons to be drawn from these crises. here i want to highlight just two. first is the importance of sound macroeconomic policies. prudent fiscal policy and stability oriented monetary policy make an economy more resilient to shocks. in some cases, more flexible exchange rates could help prevent unsustainable developments. second is the need for careful sequencing of liberalization and coordinating capital account liberalization with structural measures that strengthen domestic financial systems. i would like to highlight a couple of issues in international finance that are particularly relevant for central banks. first, as shown clearly by recent market volatility, global financial integration has made different countries and markets more interdependent. consequently, domestic asset prices are increasingly determined by global factors. for instance, the question of to what extent the investment of china's current account surplus has reduced long term interest rates in advanced economies, most notably in the us, has been studied extensively in recent years. the results are not clear - cut but it seems that the impact has been substantial. for central banks this increased interdependency means somewhat reduced leverage to influence domestic longer -

this in turn means also better incentives in banking and hence a more stable financial system. preparations for single supervisory mechanism let me now share with you some recent developments in the single supervisory mechanism ( ssm ). the eu regulation assigning supervisory tasks to the ecb became effective in early november 2013. already well ahead of this time in late summer 2012, the ecb and national supervisors established the high - level group which steered practical preparations to ensure timely adoption of supervisory responsibilities by the ssm. thus we have got a “ flying start ” for the whole project. as a concrete step, the ecb governing council nominated ms daniele nouy for chair of the supervisory board of the new single supervisory mechanism. the heads of directorates, four director generals have been appointed and most of the mid - level managers have been nominated as well. a broader recruitment process of supervisors and analyst is under way and they will join the ecb in waves by the end of the year. the supervisory board had its historical first meeting in january and now on it meets twice a month. at the beginning many of the issues have related to accepting, confirming and further developing the issues prepared by the high - level group. now there is an on - going transition period, during which a comprehensive assessment of significant banks is carried out. during the same period other preparations for the ssm are to be completed. bis central bankers ’ speeches comprehensive assessment the comprehensive assessment of european banks is an essential element of the preparations for the ssm. it should be noted that the ssm regulation also enables the ecb not only to obtain all the relevant information from the national authorities necessary for making the assessment but also to take over direct supervision of any credit institution it deems necessary. this is important to guarantee consistent application of high supervisory standards. the comprehensive assessment has three main goals. first of all, the assessment aims at transparency through enhancing the quality of information available on the condition of banks. its second goal is to repair banks ’ condition by identifying and having the necessary corrective actions implemented where necessary. finally, the comprehensive assessment builds confidence by assuring all relevant stakeholders that banks are fundamentally sound and trustworthy. the ecb will conduct the comprehensive assessment in close cooperation with national authorities, and also with esrb and eba. the ecb will detail the design and strategy of the assessment exercise, monitor its execution, perform quality assurance as well as collect and consolidate the results and finalise and disclose the overall assessment. national supervisors execute the