consultation on measures for a new eu framework for crisis management in the banking sector, in which policy options as regards early intervention, bank resolution and harmonised insolvency procedures are considered. in addition, it will be relevant to enhance the framework for coordination among the relevant authorities for financial stability in case of crisis. the third and final area relates to macro - prudential supervision. one of the key lessons stemming from the financial crisis relates to the importance of understanding and assessing the degree of “ interconnectedness ” between market participants. in particular, the crisis demonstrated that the nature and magnitude of the systemic risk in the financial sector is related not only to the potential illiquidity or insolvency of large banks or other major regulated financial institutions, but it also depends on the close intertwining between financial institutions, markets and infrastructures. the financial stability framework needs to be able to identify and assess systemic risks corresponding to the degree of “ interconnectedness ” i just mentioned. in this context, macro - prudential oversight would focus on factors and risks that can affect the stability of the financial system as a whole and therefore would complement micro - prudential supervision, which looks at the stability of individual financial institutions. macroprudential supervision in the euro area : the european systemic risk board macroprudential oversight will be the key task of the european systemic risk board ( esrb ), which is built on the proposals of the high level group chaired by jacques de larosiere. the european commission ’ s legislative proposals for the establishment and functioning of the esrb have received the support by the ecofin and the eu council. the european parliament is currently considering the proposals in its turn. let me also mention that the ecb / eurosystem expressed its stance in the opinion adopted on 26 october. 2009 it welcomed the broad agreement reached by ecofin on the draft legal texts regarding the establishment of the esrb and the involvement of the ecb in supporting the esrb. as stated in its opinion, the ecb has decided that it stands ready to provide the analytical, statistical, administrative and logistical support to the esrb, including the secretariat of the esrb. what will be the activities of the esrb and what is its value added? the esrb will be expected to actively monitor the various sources of risk to financial stability in the eu – across countries and across financial sectors, and also taking into account global developments. as a result of this monitoring

. efficiency no one would seriously question the premise that a financial system, whatever its structure might be, will best serve development and welfare objectives by producing its services at as low a cost as possible. like in any productive activity, achieving this objective depends on three broad factors : the cost of raising funds, the costs of due diligence and risk mitigation associated with deploying these funds and the cost of intermediation, which depends significantly on competition, organizational structure and the deployment of technology. the policy and regulatory imperatives on this front should be to ensure that financial service providers have the ability to carry out their resource mobilization and deployment activities in a competitive environment, in which individual providers have the flexibility to organize themselves in the most cost - effective manner. however, this is as far as the analogy with other productive activities goes. as we all know and was vividly demonstrated during the crisis, financial services are in many significant ways a unique specimen, which requires special consideration. this brings me to the next objective. stability we could also term this objective “ prudence ”, but i believe that stability, while fully encompassing prudence, is a somewhat broader concept. the foundation of this objective is, of course, risk. financial services, however defined, are essentially risky in nature. there would be little value added by financial intermediaries if they did not find ways of taking on risks and earning the rewards that go with them. however, the license to take risks cannot be unbounded ; the consequences of risks materializing can be severe for both direct stakeholders and, significantly, innocent bystanders. a prudential approach ensures that individual financial service providers put aside adequate resources to avoid such consequences. a wider approach to stability is based on the notion that the system as a whole has the capacity to deal with widespread pressures that emanate from the multiple linkages and inter - dependencies within the system and are beyond the prudential capacity of individual providers to handle. the recent crisis and ones preceding it have clearly shown that the stability of the financial system is a significant contributor to macroeconomic management. it has, of course, been difficult to translate this into a widely accepted policy framework, because so many potential instruments of stability are in direct and obvious conflict with the other four objectives that i referred to. but, clearly, however efficient and dynamic it may be, an unstable financial system can seriously undermine the performance of the real economy and a viable way to resolve these conflicts needs to