and capacity to act in cases of market turbulence. but i duly recognize there are other proposals on the table as well. one is to change the name of the esm to european monetary fund, emf. would this be justified? to my mind the nameplate is less important than the substantive improvements in the functioning of the esm. besides, the esm has become a positive, solid brand, based on the high integrity and professional quality of the institution and its staff, under the competent leadership of its managing director, klaus regling. another reform proposal relates to the institutional dimension. to increase accountability, the european commission has proposed to transfer the esm into the eu treaty and put it under parliamentary control of the european parliament, in a rather similar way as the ecb is – mostly focusing on the full right of demanding and receiving information. on the other hand, the commission proposal would maintain the key policy decisions and executive functions in the hands of the board of governors. this includes the decisions to approve of conditional financial programmes and the appointment of the managing director. hence the commission proposal is actually less of a great federalist leap forward than some fear and others wish. in principle, there are two alternative ways of making progress in european cooperation, either by the well - tested community method or by the intergovernmental method, which some years ago was described as the union method. for the eu to continue making legitimate progress in integration, in my view it is necessary to take good care of the community method, since it is able both to provide the effective capacity to act and the legitimacy to take decisions. it is based on the commission ’ s right of initiative, its independence and professionalism, the qualified majority rule in the council and co - determination by the european parliament. it enables the union to take decisions and keeps all member states – including the small states – on board. revisions of fiscal rules : the expenditure rule let me turn to my third and final subject : the revision of fiscal rules, in particular by introducing the expenditure rule into the eu fiscal rules. in the future, the economic and monetary union can work smoothly only if the public finances of all member countries are credibly on a sustainable footing. a combination of fiscal policy rules and market discipline related to government borrowing is necessary to ensure this. fiscal rules should be sufficiently simple to ensure that, in normal circumstances, we can be certain in advance that they will be adhered to when budgets are prepared. the expenditure rule can

shamshad akhtar : global transaction banking keynote address by dr shamshad akhtar, governor of the state bank of pakistan, at the annual global transaction banking seminar, organised by deutsche bank, karachi, 3 may 2006. * * * let me first welcome the deutsche bank global team to pakistan. deutsche bank has been an age - old partner in the development of pakistan ’ s banking industry and we look forward to the advice of their global team, and their contribution to supporting the enhancement of global transactions in pakistan ’ s banking industry. today, pakistan offers a promising ground for financial experimentation and innovation. pakistan ’ s banking industry has seen brisk growth in banking assets which today stand at over $ 60 billion. bank ’ s profitability is at an all time high and unprecedented, reaching close to rs 95 billion by end 2005. aside from higher efficiency gains in the industry attributable to benefits arising from significant banking sector restructuring and reforms, high profitability of banks has been achieved because of high interest margins. in the period ahead, the financial industry however has to be positioned for a more competitive environment and has to cater for more diverse and complex requirements of pakistan ’ s consumers and infrastructure. pakistan, like the rest of asia, is growing fast and the rise in per capita income, emergence of the middle income group and relative wealth increases altogether bring with them new demands for the retail banking industry. among others, both investors and industry are seeking better investments and financing alternatives and solutions, with demand for private debt, asset based and mortgage based securities, credit derivatives and hedge products etc. now emerging from different segments of the economy and population. beside these real sector developments and requirements, financial industry of pakistan has to catch up fast with the global developments and achieve better financial diversification and strengthen its risk management systems. in pakistan ’ s context, it has to be recognized that while large banks will continue to thrive on volumes of business which they have traditionally captured given their reach across the country, it is the foreign banks with their competitive edge in global transaction banking that can offer unique and new financial solutions and lead the way for the rest of the banking industry to provide to customers an integrated solution that caters for emerging consumer and industry requirements. global changes in the financial industry compulsions to go this route are mounting. world - wide, the financial landscape has changed driven by : • changing macroeconomic factors such as economic growth and demography and institutional development as capital markets have matured and population demands for