- playing field and to minimise the potential for arbitrage through harmonization, particularly in the case of the proposed bank levy. at the same time, we must ensure that banks, especially the larger ones, go back to their core business of extending credit to the real economy and refrain from engaging in the kind of risk - taking that gave rise to the recent crisis. priority must, therefore, be given to the one measure that is most likely to influence the banks ’ ability to take risk, that is the bcbs proposals on bank capital. capital buffers must henceforth be commensurate with the degree of risk undertaken. it is no longer acceptable that profits are privatised and losses socialised. in a broader context, another important challenge is to ensure that systemic risks are addressed without unduly constraining financial innovation and integration. finally, the opportunity provided by the current period of reflection should also be used to examine the possible consequences of some of the reform proposals for the functioning of financial markets and for the implementation of monetary policy, and by extension also for the real economy. references 1. european central bank, the incentive structure of the “ originate and distribute ” model, 2008. 2. francis boyer lecture of the american enterprise institute for public policy research, “ the challenge of central banking in a democratic society ”, 1996. 3. http : / / www. reuters. com / article / idusn0132320120071003 4. the high - level group on financial supervision in the eu, 2009. 5. basel committee on banking supervision, “ strengthening the resilience of the banking sector ”, 2009. 6. basel committee on banking supervision, “ international framework for liquidity risk measurement, standards and monitoring ”, 2009. 7. directive 2009 / 111 / ec of the european parliament and of the council of 16 september 2009 amending directives 2006 / 48 / ec, 2006 / 49 / ec and 2007 / 64 / ec as regards banks affiliated to central institutions, certain own funds items, large exposures, supervisory arrangements, and crisis management. oj, l 302, 17. 11. 2009, p. 97. 8. european commission public consultation regarding further possible changes to the capital requirements directive ( “ crd ” ). the consultation was closed on 4 september 2009. 9. european commission public consultation regarding further possible changes to the capital requirements directive ( “ crd ” ) – launched on 26 february 2010. 10.

michael c bonello : the adoption of the euro by new member states challenges and vulnerabilities speech by mr michael c bonello, governor of the central bank of malta, at the suerf seminar organised by the central bank of malta, valletta, 4 may 2006. the references for the speech can be found on the central bank of malta ’ s website. * * * distinguished guests, ladies and gentlemen i would first like to welcome you all to this seminar which has been jointly organised by the european money and finance forum ( suerf ) and the central bank of malta. a special greeting goes to our foreign participants and guests, including some fifty members of suerf from twenty - three countries. the topic chosen for the seminar is particularly appropriate at a time when the ten nms have just entered their third year of eu membership and are increasingly focusing their attention on monetary union. in these introductory comments i shall, therefore, attempt to highlight some key issues which must be dealt with on the path towards the adoption of the euro. as our policy makers have become acutely aware during the past two years, this path is characterised by manifold challenges and vulnerabilities, not least those associated with real convergence, fiscal consolidation and capital account volatility. the orientation of economic policy in these areas will have to focus strongly, at the level of both national authorities and european institutions, on consistency, flexibility and credibility if we are to extract the maximum gains for all out of this next step in european integration. long run net benefits of euro adoption in order to place this topic in its proper context it is first important to recall that the adoption of the euro is expected to produce significant net benefits for the nms in the long run. a consistent body of literature points to the likelihood of substantial output growth arising out of increased external trade in countries forming currency unions. recent studies suggest trade gains of between 6 % and 15 % from the creation of the euro after five years of its existence. 1 on the basis of these estimates, euro adoption could raise gdp by at least 1 % to 2 % over 20 years in the nms. 2 these gains arise from the elimination of exchange rate volatility and risk, lower transaction costs, increased competition and price transparency, all of which lead to trade creation. lower risk premia on borrowing costs and the stronger frameworks for policy discipline prevailing within the euro area are other potential sources of economic growth. such considerations will no doubt have played a part in the recent