greater amounts than was needed to normal flow of transactions. the resulting inflation was effectively a form of taxation transferring resources from money - holders to the hands of rulers to be used for extravagant consumption or warfare. bis central bankers ’ speeches it is not difficult to find examples of financial fraud or misconduct in a more recent history. some sorts of financial crimes are reported in the press almost weekly. these are typically crimes against property, attempts to converse ownership of assets to one ’ s personal benefits. the list of acts is long, ranging from stock manipulation and insider trading to credit card fraud and counterfeiting. these headlines should not mislead us to regard all bankers as gangsters ( banksters ). after all, the number of the acts of fraud is very small compared to millions of honest transactions conducted each day. more importantly, we shall not forget the significant role financial markets have played in economic development. the benefits brought about by the financial markets cannot be assigned only to particular persons or businesses. they also bring about systemic benefits what the economists called positive network externalities. for example, i benefit from using a payments system only because i know that many others are using it as well. i trust a bank when i know that others trust it as well. similarly, if the financial markets cease to function properly, be it because of unexpected events, excessive risk taking or misconduct, everybody is bound to lose. the negative externalities of a banking crisis can be huge, as we all well know. therefore it is a in the public interest to design the regulatory framework and set up institutions, which reduce the probability of systemic crises. needless to say, the regulations need to be of good quality, which means, inter alia, being not biased toward any vested interests. similarly, the institutions must be trustworthy, which means, inter alia, being impartial and free from corruption. what is needed, in addition, is the set of institutions that take care that fraud and wrongdoing in finance, whenever it occurs, do not get unpunished. to sum up. the role of trust in finance is the same as the role of trust in a good society in general. it may not be enough to say that “ all you need is trust ”. you also need trustworthy institutions. bis central bankers ’ speeches

compared with the biggest surplus countries, their financial systems do a better job in financial intermediation. 2 ) these two groups of countries have also very different savings and consumption patterns. this reflects partly the already mentioned differences in financial systems but there are also other important differences. many " surplus countries " have poorly developed social safety nets compared with the bulk of latin american countries. the lack of safety nets forces people to save more and much of these savings are channelled abroad, given the lack of suitable instruments at home. in many of the surplus countries, most notably china, the markets for consumer goods are still underdeveloped, albeit they are developing quite rapidly. 3 ) there are also striking differences in monetary and exchange rate regimes. in the countries that are the main " culprits " for surpluses, the regimes tend to be based on external anchors and it seems that many of these countries have currently undervalued currencies pegged to the us dollar. in latin america, the increased prevalence of flexible exchange rate regimes, often combined with inflation targeting, make significant exchange rate misalignment less likely. furthermore, in these regimes policy stance is determined by domestic conditions not by an external anchor. deficiencies in institutional development in many of the surplus generating countries do not always receive sufficient attention in the discussion on global imbalances, which tend to focus excessively on the need for exchange rate adjustment. as for the latin american countries, one could say that in many important respects these countries have already contributed to resolving global imbalances by implementing sound policies and building institutional infrastructures. in this regard, many of the surplus countries have a lot to learn from the experience of the latin american countries.