##sustainable fiscal deficits in debt - ridden countries and too little toward growth and job creation. i believe that redirecting of financial resources more toward growth – more specifically, toward countries with high productivity – could yield substantial stability benefits to all in the long run. this is why i see a greater role for asia going forward. asia weathered the global crisis well, and has thus far remained resilient to negative spillovers from the on - going fiscal crisis in europe. moreover, many expect asia to develop even more into the engine of global economic growth. but asia also faces many challenges. its source of growth is skewed to external demand, and there is limited scope for domestic demand to play a major role. intra - regional trade has been on the rise, true, but it remains only secondary to trade with other advanced regions. our regional financial markets are meanwhile underdeveloped, less satisfactorily integrated, and vulnerable to shocks of external origin. while asia accounts for over one - third of world gdp, its share in world finance is less than one quarter. bis central bankers ’ speeches that said, i find the theme of this conference to be highly topical. asian market integration and financial innovation should, i believe, be our path to prosperity and stability. in what follows, i would like to set out my views on this theme, with a particular emphasis on the role of the central bank. asian market integration : a way forward to financial deepening and stability let me begin by addressing the benefits and the risks of financial integration in asia. asian economies grew rapidly over the past several decades, by integrating themselves to the world economy through trade. during the catch - up process, asia was able to upgrade and boost the scale of its productive capacity and, through learning - by - doing, significantly reduce its productivity gap vis - a - vis its advanced trading partners. i believe that financial integration can and should bring the same benefits for asia as trade integration. in principle, financial integration facilitates domestic financial development, improves resource allocation within and across countries, and ultimately promotes growth. the diverse stages of development and demographics of asian countries offer fertile ground for such efficiency gains from financial integration. these benefits are relatively well understood. another important but less known benefit is a stronger market base for financial stability. financial integration tends to bring about greater market liquidity, improved risk allocation and enhanced competition, all of which contribute to financial stability by allowing market participants to better absorb and trade risks among

an interest rate policy geared to the needs of the swiss economy. membership would also spell the end of the interest rate advantage with respect to the euro area, which still stands at one and a half to two percentage points. this would entail the loss for the swiss economy of an important competitive advantage. if there are grounds for hoping that an enlarged eu will lead to greater stability and prosperity on the european continent, it is also conceivable that a larger market will open new opportunities for switzerland. once the bilateral agreements have been extended to cover the new member countries, our economic relations with the enlarged eu will be regulated by the same network of bilateral treaties, as is the case with the current eu. the swiss economy will thus enjoy easier access to a greatly expanded market totalling 450 million people. however, eu enlargement also represents a challenge for switzerland. a larger union needs to work out its joint position in lengthy internal consultation and decision - making procedures. it could thus become increasingly difficult for us to defend our own interests. enlargement is therefore very likely to influence our relationship with the eu. let me now move to one of the key features of our economy : our financial sector, which currently also faces some major challenges. 4. switzerland as a european financial centre since the beginning of the last century the swiss financial sector has been a mainstay of our economy. it accounts for just under 6 % of total employment, but currently generates over 10 % of the country ’ s gdp. relatively speaking, therefore, it is more than twice as big as the german or french financial sectors, for example. switzerland ’ s globally active big banks and insurance groups are also major international competitors in most market segments. the two big banks are among the world ’ s ten largest banks. in terms of value added by the financial sector, switzerland occupies fourth place behind new york, london and paris, but is ahead of frankfurt. switzerland plays a leading role in banking, above all, in asset management. almost four trillion francs worth of assets are managed in switzerland. this accounts for around one - third of the world ’ s portfolios of cross - border investments. over the last 10 years, our financial institutions have also greatly expanded their activities abroad on a global basis. in 2000 the value of their foreign investments amounted to some 54 billion swiss francs, which is equivalent to around 14 % of total swiss investments abroad. switzerland is also a magnet for foreign banks. nearly one in every two banks in switzerland