us trading times. the new enterprise is based in frankfurt. the german - chinese exchange will operate using the established and globally available infrastructure of the deutsche borse group. the three joint venture partners intentionally chose frankfurt as the financial platform from which to offer their service in a european regulatory environment and in the european and american time zones. the money flows resulting from securities settlement are to be channelled through the clearing infrastructure provided in frankfurt. in my view, china ’ s real economic development and the launch of the china europe international exchange will give rise to additional volumes of rmb payments. the german banking industry will decide which channels shall be used to clear rmb payments. nevertheless, i would wish that the german banking community will support the german financial market to become an rmb hub. this could be done by processing rmb transactions via the rmb clearing bank in frankfurt. potential prospects the bundesbank operates the target2 system together with the french and italian central banks, while the eurosystem is currently looking at strategically enhancing its market infrastructures. for example the eurosystem discusses to offer multicurrency services in a future target2 system. for such a new service the renminbi and its processing would be a candidate. a connection on infrastructure level between the chinese payments traffic and an enhanced target2 system – we can call it target3 – would also an option. however this will only be possible, if both systems use a harmonised iso 20022 standard. this is not yet the case today. all in all the surrounding will remain interesting and exciting. many new ideas and visions can still be developed. bis central bankers ’ speeches

. the countries which participate in the international capital market tend to have higher per capita growth rates than other countries. the globalisation of production and trade calls for new solutions for payments and financing. it is also a great advantage to have a financial system that is capable of channelling savings to those parts of the world that need them most for investment. however, participation in the international capital market presupposes that a country has an adequate banking system with accounting regulations and other institutions, such as thorough supervision that ensures sound banking practices. this has evidently not been the case in a number of the countries that are now affected by the crisis. nor should we forget that the banking system in sweden was not fully prepared at the time when our credit market was deregulated. if loans from the international capital market are channelled to a country where the banking system and other financial institutions are not ready to function in this community, the result may thus be loan losses. but, as you know, it takes two to tango. it may well be asked why banks in the industrialised countries have arranged loans to countries that evidently were not yet sufficiently sound borrowers. capital has been flowing to emerging markets in a broad stream in recent years. it has been channelled directly through the banks as well as indirectly, for instance via hedge funds. a good many such funds have obtained large loans from banks in the industrialised countries and, in pursuit of favourable yields, invested the money in emerging markets. this indirect lending can be likened to the swedish banks ’ earlier lending to finance companies. this brings us to the nature of banking in a more profound sense. traditional banking involves accepting deposits from the non - bank public and lending these funds to various borrowers. moreover, the equity capital on which banking is based is small, which implies high leverage and low solvency. if all the banks ’ capital had consisted instead of equity, incurred losses could have been handled more or less painlessly. with a large proportion of borrowed capital, however, there are liable to be chain reactions that successively spread through the banking system. it is precisely this that necessitates comprehensive, efficient supervision and a functional set of regulations in order to avoid unnecessary losses. that is also why central banks around the world have been assigned the function of safeguarding the financial system ’ s general stability. what can be done? the current problems in the global financial system need solutions for both the short and the longer run. in the short run it is a