deep skill base ; and an unbureaucratic approach to financial regulation, which has been developed working with the grain of the market. 27. all these advantages and more help to explain why there are more people working in financial services in the city of london - - over 600, 000 - - than there are in the entire population of frankfurt and its surrounding region! 28. none of this gives any grounds for complacency : the financial services industry is an intensely competitive business. but importantly, if we can harness the strengths of the london markets to the opportunity presented by the euro, i believe that will be an important contribution to the success of the single currency. of course, london will benefit. but london is not just a uk financial centre. it is a european financial centre, and by providing competitive trading facilities in the euro london can help provide better facilities for business and industry across the whole single market and bring more business into europe from the rest of the world. opportunities in euro for market participants 29. i have talked so far principally about the steps the authorities are taking to help prepare the london markets for the euro. but of course, at the end of the day, the authorities can only facilitate : the real challenge in seizing the opportunities presented by the single currency has to be met by market participants themselves. let me touch on three areas where the advent of the euro is likely to usher in significant changes - - but, i believe, positive changes, offering new business opportunities - - for financial market participants. 30. first, in the bond markets, monetary union will serve to unify the various national government bond markets of the emu participants, and the already substantial ecu bond market, into a single market in a single currency with multiple national government issuers. currency risk will be removed, at a stroke. this does not, of course, mean that all government bonds of the different national issuers will trade at the same price : differences will still remain in trading structures and liquidity, in perceptions of sovereign risk and the scale of supply by different governments, and in investors ’ basic preferences. but the different national government bonds will tend to trade on essentially the same yield curve, with the focus of the market being concentrated, even more so than at present, on spread relationships. 31. this of course raises the interesting question - - spread over what? who will provide the benchmark issues? moreover, the intensified focus on spread may produce two further results. first, there

##ly support. 24. but we also want to see target as efficient and effective as possible, so that it becomes the payment system of first choice for banks, in order to maximise its benefits in reducing systemic risk. we have to recognise that target will be competing with alternative euro payments mechanisms, including correspondent banking and the european banking association ’ s net end - of - day settlement systems. consistently with this view, we believe that it is essential that payments be able to flow freely throughout the target system. 25. why do we devote this effort for preparing for the euro? the reason is very straightforward. london ’ s pre - eminent position as an international financial centre rests on the fact that it provides broad and liquid markets for the full range of internationally - traded currencies and for the vast array of different instruments and facilities denominated in them. the euro will undoubtedly become a major internationally - traded currency, and it is therefore certain that it will be traded extensively in the london markets. the euro thus represents an opportunity, rather than a threat, for the london markets, and it is important that the london markets prepare in good time the systems and infrastructure needed to take advantage of this opportunity. london as a financial centre after emu 26. the reason why we are convinced that the euro represents a major opportunity for the london markets relates essentially to the strengths that the london markets have displayed over the years : • london is a global financial centre rather than just a european centre, with much of its business generated around the world, not just within europe. • london has always thrived on financial innovation, and has a strong track record of capitalising on new opportunities. • the euro may very well bring greater financial activity to the main continental financial markets. but expansion in these markets is not, on past experience, a zero sum game : it is likely to lead to more, not less, activity in london since london is the major interface with the rest of the world in the european time zone. • the economics of financial market activity point to concentration, to gain economies of scale and facilitate better management control. that is why many firms have been moving their operations, and even headquarters, to london as the preferred financial centre. uncertainty about uk participation in the single currency has been with us for some time. but undeterred by that uncertainty, firms have continued to concentrate their trading activities in london. • london has an unrivalled range of markets and ancillary services ; and an associated