just appearing on the horizon. 4. heralded as the first international organisation with a universal vocation for globalisation, the wto ’ s creation and the overall outcome of the uruguay round added optimism to an already very optimistic environment. in november 2001, the doha round began in qatar, focusing on the developing countries ’ problems. as is known, it has still not been possible to complete those talks. also in 2001, on 11 december, the people ’ s republic of china became a member of the wto, which was clearly an enormously important moment for the world economy. by benefiting from wto rules, china enjoyed even more favourable conditions for its rise in the international economic context. and it has used them very successfully, creating a new geoeconomy and a new geopolitics in a few years, which in itself is a rare historic event. it is clear that the inability to complete the doha round has weakened the multilateral trading system, not only due to the objective meaning of that inability but also due to the great disappointment that it signified compared to initial expectations. but that is not the key factor of its crisis. in truth, as the 21st century has advanced, it has become apparent, to paraphrase mark twain, that reports of the death of the nation state have been greatly exaggerated. on its own that might not be a grave problem. and we can agree that the weakness of states beyond certain limits is in itself problematic. the real problem is that there are those who seem to believe that returning to a position focused on the exclusive defence of the national interest, a position imposed unilaterally if necessary, might solve countries ’ problems. given the current nature of the world economy, this does not seem possible, even for the largest powers, whichever they may be. the multilateral trading system today is under pressure. but it is not moribund. the international financial crisis and the great recession it caused had immediate repercussions on international trade, which in 2009 contracted for the first time in several decades. but thereafter it clearly recovered. many countries continue to be deeply committed to the goals of the multilateral trading system. some problems are old and relate to familiar international trade themes : how to view preferential trade agreements, which have proliferated relentlessly ; how to assess the effects of economic regionalism, with the establishment of economic integration zones ; and are these circumstances positive or negative for the expansion of international trade? other problems result

at the same time bis central bankers ’ speeches preventing a harmful credit contraction in the economy is no easy task – a task that requires a fine balance between “ science and art ” in policy - making. one point that needs to be absolutely clear is that the business model that prevailed before the crisis – based on the expansion of credit sustained by large - scale cheap wholesale funding – is no longer viable. the financial landscape that will emerge once the dust finally settles will demand less leveraged and more strongly capitalised business models in banking. this paradigm shift is underway and is embedded in the international initiatives for regulatory reform. in this setting, portuguese banks will need to face two key challenges, which are hurting efficiency levels : a lower transformation ratio ; and narrower margins, reflecting the combined effect of a large share of mortgage credit contracted at very low spreads and more expensive funding. a comprehensive answer to these challenges will probably require a combination of better resource utilisation, leading to lower costs ; the use of new instruments to reduce the weight of cheap mortgage credit ; and finding strategic investors with access to market funding. i am confident that banks will find the best strategies to address these challenges and to further strengthen the competitiveness of the banking sector. i will not take more of your time. to close, i would stress that the financial crisis has taught us many lessons and brought about fundamental changes in the functioning of the financial system. banking supervisors around the world are working to bolster the resilience of the financial system. it is my strong belief that portugal is in the front line of these efforts. it is also my conviction that banco de portugal is today much better equipped “ to see both the forest and the trees ”, and to act decisively if a fire should start. thank you. lisbon, 3 february 2012 bis central bankers ’ speeches