miguel fernandez ordonez : reform of the financial sector opening remarks by mr miguel fernandez ordonez, governor of the bank of spain, at the third conference on the reform of the financial sector on the occasion of the 25th anniversary of expansion, organised by expansion and kpmg, madrid, 13 may 2011. * * * let me first thank expansion and kpmg for kindly inviting me to take part in this forum on the reform of the financial sector. financial system reform is under worldwide scrutiny by multilateral agencies, governments, central banks, supervisors and even public opinion. their interest is understandable, as the unprecedentedly acute economic crisis in recent years did indeed originate in the financial system. the concern to identify the errors that led us to crisis and, above all, to prevent it recurring is therefore not surprising. the response to the crisis is largely taking shape in the international arena, given that the main factors at its root have a global reach. also, many of the measures needed to prevent its recurrence can only be implemented if they are tackled in a coordinated fashion by the main world economies. in recent years we have also witnessed changes in world economic governance of a speed and on a scale that would have been inconceivable a short time ago. good examples of this are the work by the g - 20, the creation of the financial stability board ( fsb ), the strengthening of the basel committee on banking supervision and the changes in the governance structure of the bis and the imf. highly significant progress is being made in international financial regulation, including most notably the regulatory reform of capital and liquidity ( known as basel iii ), which will come into force in 2013. both the reforms already approved and those still under discussion within the fsb are geared to countering the problems identified as lying at the root of the recent crisis. examples here are the measures aimed at smoothing the cyclical fluctuations inherent in the banking system, namely procyclicality, at restricting high - risk activities, at mitigating systemic risks ( in particular those arising from the so - called systemic financial institutions ) and at setting in place more rigorous and effective supervision. to this must be added the efforts made in europe, both in terms of governance and crisis management in the eu, and of the revision of financial system regulation and surveillance arrangements. in this respect, a new supervisory structure has been set up in the eu, namely the european systemic risk board, which will be entrusted with

as precious metals and spices, and no case for permanent settlement because the american continent offered everything we could offer and was much closer. it was only a couple of coincidences that caused the british government to take the extraordinary decision to establish a settlement at a place only once visited, and at the other end of the earth. this isolation continued to disadvantage us economically despite our abundant resources and relatively small population. transport costs were enormous and delays immense. it took five months to reach england by sail, and even when steam replaced sail and modern ocean liners replaced steam, it still took about four weeks for the journey. air travel has shortened it to about 24 hours, but it took ages for us to forget our old attitudes. we were accustomed to an overseas trip, even a business trip, being a long drawn - out affair. we had occasions before air travel when australian prime ministers would spend more than a year at a time in london. going over old reserve bank records of the 1960s and 1970s, i noticed earlier governors going on business trips that lasted seven weeks. today a one - week business trip is a long one. modern transport and communications have enormously reduced the tyranny of distance, even if it has made our lives more hurried. the other factor that has reduced the tyranny of distance for us is the growth of asia. the atlantic ocean, with europe and america on each side, is no longer the undisputed centre of world economic activity. asia and the pacific rim, while not as rich as the atlantic, are clearly the area of fastest growth and largest population. this has presented enormous opportunities for australia and, by and large, we have been adaptable enough to seize the chances offered. but it still has not completely dispelled the tyranny of distance. for example, many international companies headquartered in the united states or europe still find it more convenient to put their asian headquarters in singapore, hong kong or tokyo because they are only one flight away from headquarters, whereas major australian cities are two flights away. we should also remember that australia ’ s capital cities are in its southern half, while the capitals of our big trading partners - tokyo, seoul and beijing - are in northern asia. it would be easier if we were talking about darwin and jakarta, but that is not where the real action is. ( b ) geography is destiny it is widely believed that geography determines whether a country will be rich or poor. this is because most of the world ’ s poor