markets participated in the systemically important international fora. i think you all agree at this advanced economies or emerging markets are all prone to sectoral imbalances, which, if left unchecked, can lead to a full - blown crisis, anywhere, any time, when the bubbles burst. the impact of a crisis in an advanced, systemically important country can be much broader and deeper, creating a larger scale of world - wide externality. emerging markets, unlike others, have had our share of coping with new challenges brought on by this phenomenon as well as those created by us one decade ago. it is, therefore, not only the responsibility of advanced countries to be in charge of global surveillance but also the responsibility of emerging markets to share our views and experiences of how to reform ourselves to be better prepared for greater uncertainty. against this background, this calls into question whether the surveillance mechanisms available at the moment and the role played by emerging markets in international cooperation are adequate in ensuring international financial stability, the essence of the mission of ifis. it is therefore in times of crisis that the value of the international cooperation be measured and the voice and representation of emerging markets be heard ifis. the unprecedented events of the past months present a historic opportunity for the international bodies to rise to the challenge. the time has come for them to be more proactive and become truly global institutions. apart from strengthening the roles of ifis, i believe that regional cooperation can play an important role in supplementing both national and global responses. i ’ d like to raise two observations on this issue. first, the global financial crisis highlights the need to put in place an effective regional surveillance mechanism that can detect weakness early on. international financial institutions will remain useful for global surveillance and financing balance of payments need when necessary. however, waiting for the global community through international financial institutions for regional surveillance may be too little too late for timely policy measures that can safeguard the region from contagion from other parts of the world. indeed, it is very important for policymakers with common challenges to put greater efforts in having a clear and in depth understanding of one another ’ s policy and practices. this will, in turn, help raise the comfort level and can usefully avoid potential policy missteps and create policy synergies that eventually foster confidence of investors. this is the kind of trust that no amount of legal text, conditions precedent, or covenants can match, but is developed through the friendship and goodwill among friends within

results were largely attributable to retail banking business in france. consumer credit and home loans continued to grow, along with specialised financial services. in addition, falling interest rates had a positive effect on interbank business - which in france has always been significant - and drove down the net expense on these transactions. by contrast, capital market activities and asset management were hit by financial market turbulence, giving rise to substantial provisions in some cases. furthermore, for the second year running, fees and commissions contracted as a percentage of net banking income, falling to 26 per cent compared with nearly 30 per cent in 2000. 1. 3 diversification has helped french credit institutions to offset negative cyclical trends as in previous years, conventional retail banking activities cushioned the negative impact of trends in investment banking and asset management in 2002. on the international front, too, retail banking was a major avenue of development for leading french banks. it must be stressed, however, that the consolidated accounts of france ’ s largest banks were slightly less positive in 2002, even though the overall situation was satisfactory. in this regard, the dollar - euro exchange rate had an impact on the foreign activities of these banks, denominated in euros, which were also exposed to the negative earnings momentum of subsidiaries specialising in equity - related businesses. 2. french banks must buttress the elements that have allowed them to withstand cyclical contingencies for the past few years in addition to diversifying their business lines - and i am pleased to note that securities analysts are now taking this factor into account when assessing different banking industries - french banks have improved their capacity to withstand cyclical contingencies. that ability must naturally be maintained and strengthened. 2. 1 french banks used the healthy profits of the late 1990s to strengthen their capital base french credit institutions have entered the cyclical downswing on a sounder financial footing. to illustrate that point, a review of the french banking system since the late 1960s is included in the appendixes to this annual report. book capital is now equivalent to 5. 2 per cent of total assets, compared with 4. 2 per cent in the mid - 1990s. the commission bancaire is at pains to ensure that all french banks - small and large - build up their capital gradually but steadily until it well exceeds the regulatory minimum. furthermore, provision cover for doubtful loans now stands at 60. 4 per cent. the industry must pursue this prudential policy. in particular, as we have been urging for several years,