structure of the supervisory authorities has proven to be fragmented or too complicated, giving rise to regulatory arbitrage by the market players. other times, the resources needed to effectively perform the supervisory role have been limited, negatively affecting the supervisor ’ s performance. but this crisis showed that risk came also from other sources, out of the direct control of the supervisory authorities in a given jurisdiction. for example, the increasing asset prices were fueled by ample liquidity and credit conditions, which were often affected by international developments and financial flows. the borrowing in the international markets by the financial institutions was also affected by increasing fiscal and current accounts deficits, arising due to wrong policies that created imbalances in the saving - consumption behavior of most important economic players in the economy, including the households. it is now a question, whether some of these issues could be addressed by a more powerful role of the monetary policy. financial integration, among other things, has also contributed in the rapid expansion of the financial activity, and many financial institutions have become too big for a single country. this has occurred at a time when, for the same reason, the “ de facto ” power of regulation has shifted away from the local supervisors toward their host counterparties. hence, despite a steady trend of convergence between financial legislation in many countries, there are still marked differences that, particularly at a crisis situation, create strong tensions between public authorities in different countries. a very strong effort by the public authorities in the world to address the abovementioned issues in order to improve the supervisory standards and superstructure is now underway. both in the united states of america and in the european union, the creation of special institutions is being envisaged, whose role will be to identify and control systemic risk through a different supervisory approach for financial institutions with systemic importance. at the same time, such financial institutions are expected to become subject of a more stringent regulatory framework in terms of capital and liquidity requirements, balance sheet composition and expansion, and governance relationships. revising the liquidation procedures for similar financial institutions with cross - border presence is another area that will confront the public authorities in the world with a stronger challenge. the main purpose of the reform of the financial regulatory framework will be to accommodate new incentives that will create a stronger environment for risk management in the financial industry. the main principle here is “ prevention is the better cure ”. in this regard, the perimeter of the supervision regulatory framework will be extended to include other important non - bank financial institutions and probably the

bank holding companies. at the same time, the approach in the regulatory framework is expected to feature more automatic requirements ( and less discretionary ones ), as it tries to move toward more simplicity and clarity. the move toward simplicity and clarity, will certainly reduce manipulability and enhance transparency and credibility of the banking and financial activity. these changes will be complemented by similar ones in the area of customer protection and market transparency. the regulatory framework of the financial industry is also expected to be less pro - cyclical, as new interesting proposals are being identified to adopt a countercyclical approach for capital requirements, provisioning and accounting. ensuring responsible governance for the banking and financial institutions is going to be another area of developments. new regulatory requirements and instruments to seek more involvement and higher responsibility of boards of directors for risk management and discourage uncontrolled risk undertaking are being identified. on the other hand, the supervisory authorities will need to strengthen their macro - prudential risk assessment capacities, by focusing more on systemic behaviors of the financial institutions. the central bank is expected to take a larger responsibility in this area, particularly in those countries where it did not use to have a strong supervisory role. whatever the approach in this direction, the supervisors will need stronger legal powers which will ensure their ability to act in a timely and flexible way. as mentioned also above, procedures for managing distressed financial institutions and for crisis management will need to be revised to ensure stronger and more effective inter - institutional and cross - border cooperation, and in general to better address the potential conflict between ex - ante supervision and ex - post intervention. this important process of financial regulatory reform is not without risks. i believe that the public authorities will pay particular attention to control the tendency for over - regulation, and to avoid a “ blind ” adoption of the regulatory changes as well as asymmetric / unilateral approach. regulating more should mean regulating better. undertaking risks is a natural thing for the financial industry in their valuable role of financial intermediation. such undertaking of risk, when well identified and properly managed, is useful for increasing efficiency and returns of the activity, two important elements for a viable and solid on - going financial performance. every country should certainly follow with particular attention the discussion and the changes that are being proposed for the financial regulatory reform, as this process will affect them for sure. in this regard, it is important for the public authorities to start a process that would analyze and assess the impact in their