not originally intended. as i see from the topics covered by your workstream, you touch on all these aspects, so there is a chance bis central bankers ’ speeches that the paper that will emerge out of your contributions and out of the discussions you will have today will be useful for regulators in emses and for the basel committee on banking supervision as well. hopefully, today ’ s workshop will help you with this. ladies and gentlemen, i hope that some of my more general comments on the deficiencies of the current regulatory “ push ” have not ruined your motivation for this meeting. i wish you every success in your work. bis central bankers ’ speeches

rules of financial market regulation, big ships are constructed with watertight compartments to contain any flooding if the hull is breached. however, uncoordinated insulation hinders free trade in financial services and flows of financial assets, effectively harming the common markets for them. i believe that the marginal benefits of focusing more on space for coordinated diversification of approaches to regulation are now much higher than those of trying to find “ the ultimately and finally correct set of rules ” and imposing them on all countries. as to the second difficulty, it seems to me that the much smaller size of the financial sector relative to the real economy in emerging or less developed economies has profound consequences for the optimal mix of regulatory rules – consequences that are neither acknowledged nor discussed. to develop this idea, let me stress that most measures dealing with the crises of financial institutions in the most developed economies were influenced by the fact that those institutions dwarfed the budget revenues of the relevant treasuries. consequently, their wind - down – with government guarantees for most of their liabilities to agents in the real economy, such as household or corporate sector deposits – would have led immediately to a serious downgrade of the relevant sovereign debt. but this is not the bis central bankers ’ speeches case with most developing and emerging economies and their financial institutions, whose size relative to the real economy, forex reserves or budget revenues is much smaller. consequently, the optimal mix of the pace of financial sector growth and the risk of financial sector crises differs significantly, allowing for faster growth even with higher risks. in addition, while recognising that many developed economies see a need to downsize their financial sectors and / or institutions, this need is not shared in the emerging world and less developed countries. the different mix of regulatory rules – allowing for faster growth of the financial sector in countries where its relative size is lower, even at the expense of higher riskiness of the sector, would also be welfare enhancing. after all, generally faster growth of less developed economies resulting from faster growth of their service sectors – comprising also financial services – would foster growth of the most developed countries ’ export sectors and consequently overcome the slack caused by their need to restrict their financial sector growth rates. it is quiet fascinating how this observation – which in essence merely follows some of the basic logic of the ricardian argument supporting free international trade – is being almost completely ignored in the current regulatory earthquake. this earthquake is mostly due to the financial crisis, which spread swiftly to the world primarily