of factors, especially local and regional developments. in an integrated economy like ours, small bank lenders are affected by national business conditions, just less so than lenders to large firms. formal risk management in banking the large institutions, with their declining overall asset quality, understandably have pioneered more - formal risk - management techniques designed to capture quantitatively the changing riskiness of exposures and presumably induce more rapid responses to such measures. this is the latest development in a changing balance of power between lending officers and risk - control officers. the lending officers, in a competitive economy, may tend to be more interested in getting business than in evaluating risk. before the most recent period, risk officers often have not been heard clearly enough and early enough, perhaps because they have not had the quantitative justification for rejecting weak credits until it is too late. the revolution in credit - risk management, a revolution that is still in process i might add, is the growing ability to measure risk. better ability to quantify risk has begun to give the risk manager new authority in the credit - granting process. it has also given the credit risk manager the ability to make the case for absolute and relative riskiness even during periods of expansion and optimism. making such a case may not necessarily reduce credit availability at banks for riskier borrowers ; it does mean that banks can more knowingly choose their risk profiles and price that risk accordingly. supervisors using such techniques - leveraging off the banks'measures of risk - - can also better evaluate the risk taken by banks relative to the banks'control systems and capital positions, and respond accordingly. and evident increasing transparency will let uninsured creditors, especially subordinated debenture holders, also leverage off the banks'improved risk measures, bringing to bear additional market discipline and hence enhanced risk oversight by counterparty. perhaps more critically, better risk management and the associated quantification have the real potential for reducing the wide attitudinal swings that are associated with the historical cyclical pattern in bank credit availability to which i referred earlier. formal procedures for quantifying credit risk as an integral part of the operational loan process imply - - and in the long run, virtually ensure - - a process for recognizing, pricing, and managing risk. risk quantification should lead to tighter controls and assigned responsibilities. the risk effects of lending officers'decisions can be recognized in a more timely fashion, thus reducing the cyclical attitudinal swings in banking. i would like to

in the field of retail payments, the degree of the eurosystem ’ s central banks ’ operational involvement varies across countries. most central banks provide payment services to public institutions. some central banks also offer processing facilities to commercial banks by participating in private retail payment systems and / or operating an own retail payment system. the completion of the sepa project calls for a specific effort of those central banks that are significantly involved in retail payment operations. they should lead by example, notably by supplying the new european payment instruments to their clients and by ensuring that the retail payment system they operate complies with the interoperability principle enshrined in the sepa project. 2. 2. acting as a facilitator of market and regulatory evolutions turning to the involvement of the eurosystem in payment systems issues as a facilitator of market and regulatory evolutions, it is fair to say that this mode of action has been mainly used in the field of retail payments to support the sepa project. the sepa project was launched in 2002 by the european banking community under the aegis of the eurosystem and the european commission. the banking industry has taken on the responsibility of delivering the sepa products, in particular the specifications of the new european instruments. the european commission, which grants a great importance to the sepa project in so far as the latter contributes to the achievement of the common market and the completion of the lisbon agenda, has elaborated a legal framework for payment services in the european union. it made public, in december 2005, a directive proposal that should be adopted at the european level before being transposed in national laws by 2008. since 1999, the eurosystem ’ s central banks have been actively promoting, at european and national levels, the establishment of a sepa. they proposed a vision which is now shared by all stakeholders, contributed to a constructive review of the banking community ’ s deliverables and cooperated with the european commission to address legal and regulatory impediments. while the design phase of the sepa project is almost completed, the next challenge is to ensure that migration towards the sepa is well - organised and delivered. because the starting point in each country is different, migration plans to the sepa will primarily have to be organised locally. this should naturally lead to a further involvement of the eurosystem ’ s central banks at national level, at least to help co - ordinating the efforts of the wide range of stakeholders.