, which is equally, if not more, controversial. i am referring to the proposal to introduce a deposit insurance scheme ( “ dis ” ) in hong kong. in a sense, this can be seen as the other side of the coin to deregulation. increased competition in a deregulated environment may give rise to increased risk and therefore it seems right that we should look again at the arrangements for dealing with banking failure, should it occur. let me hasten to add that we have no reason to believe that such a failure will occur. the banking system in hong kong remains profitable and robust, despite the challenges that it faces. our system of banking supervision is also generally reckoned to be effective. but banks can still get into difficulties because of risks that supervision may not be able eliminate. there is always the possibility of external shocks or unfounded rumours that may damage confidence in a bank. deposit insurance, like other forms of insurance, is there to deal with low probability events that have a major impact if they occur. to make an obvious analogy, you still take out fire insurance even if you do not expect your house to burn down. hong kong stands out as one of the few developed banking centres which does not have a dis. there is of course no reason why we should follow the rest of the world just for the sake of it. but we should at least keep our safety net arrangements under regular review to ensure that they are still appropriate to changing market circumstances. this is what we did last year when we engaged an external consultant to consider whether the existing deposit protection arrangements in hong kong were sufficient, and if not how they should be changed. the conclusion was that an explicit and limited form of deposit insurance should be introduced. we subsequently undertook a public consultation on this proposition and on the detailed design features of the proposed scheme. this consultation generated a heated, albeit civilised, debate. not surprisingly, some of the large banks vehemently opposed the scheme. opinion in the community as a whole was however generally supportive. in particular, the legislative council passed a motion by a wide margin urging the government “ expeditiously to implement a dis, which is cost effective and easy for depositors to understand, for effectively protecting small depositors, and to formulate appropriate complementary measures aimed at reducing the risk of moral hazard. ” the hkma has studied the responses received during the consultation and has submitted a report to the government on the outcome. we are seeking a decision in

circumstances. the second purpose is clarification. while concentrating on improving the strength and the size of the eu, accessibility and clarity might have been neglected over the years. the constitution shall put this back in order. it seeks to make the eu and its decision - making process more transparent and comprehensible for the citizens. so, europe is given itself a new constitution to consolidate existing achievements ; to codify key objectives and common values ; and to provide a stable and effective foundation for the future. the eu has embarked on a special method for drafting the new constitution. as you know, over the last one and a half years representatives from national and european institutions discussed in the convention what europe ’ s new constitution should look like. the ecb has followed these debates with great interest. it welcomes the draft constitution as presented by the convention in june. however, as central bankers, we had to learn a new lesson. for the first time since the setting up of the erm in 1979, a major reform of the eu takes place without monetary integration being in the limelight. the reason is simple : as far as monetary integration is concerned the eu has reached a “ sustainable endpoint ”. the maastricht treaty gave the eu a modern “ monetary constitution ” which does not need be changed. it is sound both in terms of the objectives set and the allocation of responsibilities between different actors and levels of government. the convention rightly recognised this. its draft constitution takes over the provisions relating to emu without changes in substance. the single monetary policy is, by its very nature, indivisible. thus, it is an exclusive competence of the union. the task of conducting monetary policy, as well as all other central banking tasks, has been assigned to an independent european central bank, which fulfils the task together with the national central banks of the euro area and with the clear primary objective of maintaining price stability. the draft constitution explicitly mentions the european system of central banks, the escb, in the first part of the constitution. thus, it acknowledges the federal nature of the monetary authority of the european union and its sui generis character. finally, the more specific provisions concerning monetary policy in the current treaty as well as the statute of the ecb and the escb will in their substance remain unchanged and form part of the constitutional texts of the union. i very much welcome that the fundamental features of the current set - up of emu have been preserved. after