of individual institutions guarantee their safety and soundness, and the supervisors should assure themselves of this fact. enhanced cooperation needed at the moment, banking supervision relies on national arrangements that still show a wide range of features. furthermore, the strategies for corrective actions in cases of bank fragility vary across countries. having supervision located at a national level - closest to the institutions that can give rise to financial stability concerns - favours timely access to information and allows detailed monitoring of banks ’ activities. at the same time, the principle of cooperation between the responsible authorities is forcefully stated in the eu single market legislation, and several directives establish a number of common regulations, in order to avoid the drawbacks of a fully decentralised approach vis - a - vis an increasingly integrated market. hence, we could say that cooperation is already a “ second pillar ” of the supervisory framework, alongside national competence. bilateral cooperation has been established through a nexus of memoranda of understanding. in addition, supervisory forums for multilateral cooperation have been set up. the banking supervision committee of the european system of central banks is the key present forum for this form of cooperation. it is composed of the representatives of the banking supervisory authorities of the eu countries, either forming part of the respective ncb or separate bodies, and the ecb. the committee facilitates cooperation among supervisors and the exchange of information between supervisors and the eurosystem, and assists the eurosystem in performing its duties in this field. the committee has already established its functions and developed activities in several useful fields. it has also published a number of reports dealing with the structural changes and systemic concerns in the eu banking system. another forum for dealing with multilateral cooperation is the groupe de contact, a group of eu banking supervisory authorities which, for many years, has also discussed individual banking cases in a multilateral way, but at a lower organisational level than the high - level banking supervision committee. the need for multilateral cooperation has been strengthened by the introduction of the euro. in fact, i am convinced that the only way the supervisory function is able to cope effectively with the increasing integration and to bridge the potential shortcomings arising from the geographical separation of monetary policy and banking supervision, is for the competent authorities to enhance their multilateral cooperation. what should be achieved through multilateral cooperation? ideally, a situation should be reached in which the group of european supervisors works collectively as effectively as a single supervisor, when needed. this is required when the problems involved

facing increasing demands for consolidation. the broadening of the market size and increasing share of cross - border transactions has had a positive impact on financial stability. if there were only a few market participants and the concentration of the interbank liabilities were high, the likelihood of a bank failure having stronger repercussions on the viability of other institutions would be greater. in addition, the wider euro area money markets can now absorb liquidity shortages more easily than before, as banks can borrow more readily from foreign institutions. however, if some banks should nonetheless enter into a distressed situation, the probability of the problem spilling over to other euro area countries is significantly greater than before. the wholesale market is a major channel of the transmission of potential financial instabilities. moreover, the existence of a common framework for accessing central bank liquidity is tying together euro area financial institutions to a much larger extent than usually recognised. let me now turn from wholesale activities to banks ’ customer businesses. as european banks are typically universal banks, they combine at a single institution a wide range of products. the markets for these products have varying degrees of integration - some are already global or european, while others have remained national or even local. at least the major banks already operate in strongly internationalised markets for a number of their products and already have geographically diversified activities. this makes them subject to various influences originating from outside their national markets. even if banks remain nationally based, they are increasingly subject to international market developments and the national tendencies are increasingly influenced by international developments. hence, the usual argument that cross - border mergers and acquisitions are a necessary condition in order to achieve a more integrated and international banking system does not seem very strong. in particular, many of the asset management and investment banking services are already quite internationalised, as the capital markets have taken strong steps towards integration and growth after the introduction of the euro. banks ’ own securities holdings have also become increasingly diversified across borders. the trend has been quite strong for government paper, as well as for corporate bonds. the amount of instruments issued by other euro area governments rose by 38 % in 1999, and those by firms located in other euro area countries by 23 % in banks ’ portfolios. to take an example of the financial services provided by banks in the capital market area, the leading underwriters of bonds issued by european firms are the major european banks, alongside the largest us investment banks. the “ league ” in which these players compete is clearly not a domestic one.