have facilitated such an expansion. the growing importance of emerging market economies in international financial markets is one manifestation not just of the impressive growth of those economies but also of increasing global integration. thus, it is not surprising that the need to promote financial stability, and in particular to enhance prudential supervision, in emerging market economies was identified at the lyon summit as an important objective. it is important for those economies individually and for all of us collectively. one element of the follow - up to the lyon summit that is especially fitting in the context of my earlier remarks has been efforts to enhance market transparency, including more - and more meaningful - - public disclosure. meaningful public disclosures by firms about the nature of their risk exposures and their procedures for managing those risks contribute significantly to the constructive role of market discipline. not surprisingly, the market itself is probably the most powerful source of pressure for improved disclosures. i might mention one specific accomplishment related to market transparency. central banks have agreed to establish a system of regular reporting of derivatives activities by the world ’ s major dealers, beginning as of june 1998. the system has been designed to yield aggregate data on global trading activities in a manner that avoids double counting and is sensitive to reporting burden. the aggregate data will be publicly released to enable firms to assess their own activities in relation to the market as a whole. the globalization of international financial markets and of the operations of individual firms clearly calls for international cooperation among supervisors. correspondingly, supervisory cooperation is an important element of the g - 7 summit agenda on financial stability. much of the recent work has related to the desirability of a more systematic exchange of information among national supervisors, including consideration of what kinds of information need to be exchanged and under what circumstances. the possible need for and possible roles of an “ information coordinator ” have been central issues in the joint forum discussions. the objective of a more systematic exchange of information is easy to support in principle. however, when it comes to implementation, there are questions that need to be addressed. even more questions arise when one thinks of going beyond the exchange of information to other forms of supervisory coordination, involving a “ lead regulator ” of some kind that is intended to fill so - called supervisory gaps. what are the supervisory gaps that need to be filled? each of us could probably point to episodes where problems could have been avoided, or the degree of disruption could have been reduced, if better information had been available sooner to supervisory authorities. perhaps barings is one

example. it is more difficult to point to episodes when the absence of formal arrangements for coordination of supervisory actions inhibited a response to a problem. conversely, might arrangements that are too formal, too rigid, or too cumbersome themselves inhibit appropriate responses in emergency situations, each of which is likely to be unique? another question is whether supervisory authorities have the expertise and resources to provide meaningful oversight and develop accurate assessments of the risk - taking activities of large, diversified, globally active financial institutions. if the answer is no, as might well be the case, should we nevertheless convey to market participants the sense that we are in fact adequately supervising such activities? wouldn ’ t that reduce the incentives for market participants themselves to provide discipline? would a statement that all major financial firms, even the most diversified ones, are subject to coordinated supervision suggest a degree of support that effectively extends, to an unwarranted extent, the subsidy associated with national safety nets? would it generate a degree of moral hazard that could itself be the source of systemic risk? the answers to these questions are not straightforward. however, while many firms should reassess and upgrade their risk management procedures, and supervisors should improve their procedures as well, i do not believe that the need for a radical change in our framework for the supervision of internationally active financial firms has been demonstrated. the paradigm of supervision itself is, of necessity, continuously adjusted to the rapidly changing, technologically driven financial system. in recent years, firms and supervisors alike have sought to harness technological advances to enhance risk management procedures. much thought has been given to how to make public disclosure more meaningful and to reinforce market discipline. supervisors around the world, not just in the major industrial countries, have gotten to know each other better and to understand better each others ’ problems and policies. the legal and institutional infrastructure of financial markets has been significantly improved. along with good macroeconomic policy - - a topic for another day - - a continuation of this ongoing process of careful and measured progress represents the most constructive strategy for ensuring financial stability.