mr noyer discusses implications of the introduction of the euro and some basic structural features of emu speech delivered by mr christian noyer, vice - president of the european central bank, at the european institute in new york on 29 september 1999. * * * ladies and gentlemen, it is a pleasure for me to be able to address you today and to share with you some remarks about the changes which economic and monetary union ( emu ) in europe has brought about. in so doing, i should like to focus my comments on the introduction of the euro and the immediate implications for european and international financial capital markets, for central banking and the european economy as a whole. however, the launch of a new currency, historic as it was, does not constitute a one - off event. in fact, it is the longer - term dynamics of emu which represent the great challenge for the years to come. in the second part of my address i should therefore like to touch upon some basic structural features of emu – which have perplexed observers within the eu, but especially outside europe – namely, how a single monetary policy can indeed function in the absence of a unified political entity. before that, allow me to briefly explain our terminology, with which you may, as yet, be unfamiliar. the “ eurosystem ” is the name given to the european central bank ( ecb ) and the – at present – 11 national central banks of those countries which have introduced the euro. the “ euro area ” is the term used to refer to these 11 countries. the “ european system of central banks ” also includes the central banks of the four eu member states which have not, as yet, adopted the euro. the launch of the euro on 1 january 1999 the european union achieved a new and unprecedented stage of economic integration. with the launch of the euro, 11 countries merged their monetary sovereignty and transferred the task of conducting a common monetary policy to a supranational institution, the eurosystem. this historic step was the culmination of a long period of preparation, the magnitude of which can hardly be overestimated. eu member states embarked upon an ambitious and sometimes painful fiscal consolidation process ; exchange rate crises and hostile public opinion in some countries had to be overcome by a clear political conviction that the project would eventually succeed. at the technical level, the banking and financial sectors, eu legislators and many others diligently prepared the changeover to the new currency in cooperation with the ecb

. the clearing and reporting obligation has been implemented in major jurisdictions. the cpss and the financial stability board ( fsb ) have issued guidance on the recovery and resolution of financial market infrastructures, including central counterparties. however, it should also be highlighted that little more than half the fsb jurisdictions have legislative frameworks in place that implement the g20 pittsburgh commitments. other important reforms are still underway or have only recently been adopted and implementation is outstanding. regulation implementing basel iii in europe entered into force two months ago. tomorrow the european parliament will discuss the regulation establishing a single supervisory mechanism, an important step towards a european banking union. under the single supervisory mechanism, one supervisor will have a complete overview of an entire large and interconnected banking group in the context of the bis central bankers ’ speeches single currency. furthermore, work is being undertaken to address cross - border regulatory inconsistencies. so where do we stand five years after lehman brothers and four years after pittsburgh? did we achieve the overall goal of improving transparency, mitigating systemic risk and protecting against market abuse in otc derivatives markets? are we now better placed to monitor risks building up in the financial system? i will limit myself to three of the many issues covered by this conference : lack of transparency, the challenges remaining in central clearing and inconsistencies in crossborder application. transparency first, i would like to reflect on one of the main root causes of the financial crisis : the lack of transparency relating to otc derivatives in general. when i say “ in general ”, i mean that there was not only a lack of transparency on otc derivatives at the level of the market, but also at the level of individual institutions and counterparties. there are two dimensions to the lack of transparency : lack of information due to a lack of reporting requirements, and data fragmentation making it difficult to connect the dots and see the full picture. let me address them in turn. the accounting treatment in many jurisdictions allowed such instruments to be reported offbalance sheet. furthermore, different valuation methods were used to estimate the risks attached to these transactions. hence, information was either completely unavailable or incomplete and, even if available, it could not be compared across the sector and jurisdictions owing to different accounting assumptions and valuation methods. it was thus of little value to regulators and supervisors. in addition, financial innovation and strategies that were intended to limit risk – especially securitisation and insurance through derivative products – dramatically increased the complexity of the financial system