##ralised structure. the different roles of the ecb and the ncbs can be characterized by the following analogy : the ecb is the “ captain of the team ”, and ncbs are team members. turning to how the ecb and the ncbs share the tasks in the regular cycle of the eurosystem ’ s monetary policy decision - making process, i would like to highlight the following : 1 • first, the preparation stage involves both ncb and ecb staff as well as the eurosystem committees. the aim being to gather information and agree on technical contributions that may be of relevance for the decision - making process. the exchange of information within the eurosystem has been crucial in this respect. in this context, committees provide fora that allow best practices and expertise to be shared at the technical level, foster cooperation within the eurosystem and ensure regular and fruitful interactions between the ecb and the ncb staff. • second, the decision stage involves the executive board and the governing council of the ecb. the executive board prepares the meetings of the governing council. this includes drawing - up the meeting agendas and preparing the necessary documentation. the decisions on all euro area monetary policy related issues are then taken by the governing council. • third, the implementation stage, involves the ncbs implementing the decisions in a decentralised manner and ensuring that the governing council ’ s guidelines are followed. in this context, ncbs have been fully involved in the development of the eurosystem ’ s infrastructure and in the implementation of monetary policy, thereby contributing their valuable expertise and experience in running the daily tasks and operations of a central bank. in particular, ncbs play an important role in eurosystem tasks that require a high degree of specialised expertise. let me explain this in more detail using the area of payment systems as an illustration. for example, target, the real - time gross settlement ( rtgs ) system for the euro, started operations in january 1999 at the same time as the launch of the euro. by see p. moutot, a. jung and f. p. mongelli ( 2008 ), “ the workings of the eurosystem, monetary policy preparations and decision - making – selected issues ”, ecb occasional paper no 79. tradition, the ncbs have been actively involved in the operation of payment systems, each in their national environment. the central bank community soon realised that an enhanced target system was needed to maximise efficiency and

woods architecture was not designed to cope with the instability and volatilities of the kind that i referred to earlier. having said this, it has to be recognized that, particularly after the asian crisis, there has been some progress in strengthening the structure of the old architecture. various high level forums such as g - 7, g - 33, g - 20 and international institutions such as imf, world bank and iosco have been busy in analyzing the past experience and in introducing ways and means of imparting greater transparency, early detection, better supervision, higher capital requirements, more sustainable exchange rate regimes, stronger standards and codes, and involving the private sector in resolving crises. some improvement has also been effected in imf financial facilities, such as contingency financing facility, to provide quick and higher access in the event of a crisis. however, it is also clear that these efforts, while having improved our understanding of the causes and consequences of financial volatility, and perhaps also helped in devising some precautionary measures, do not amount to a new international financial architecture which can cope with the new realities. i am also not sure that given the large volumes involved and short period over which a crisis can manifest itself, whether workable international solutions to the weaknesses in the present architecture are feasible within a reasonable time? my third point is that today - whether we like it or not - most of the responsibility for coping with the burden of instability and volatility is that of the country itself. from our own experience in india, i believe that there are three fundamental requirements for a country to prevent a financial crisis : • careful monitoring and management of exchange rates without, - i emphasis without - a fixed target or a pre - announced target or a band. flexibility in exchange rates is essential, but so as the ability to intervene, if and when necessary ; • a policy to build a high level of foreign exchange reserves which takes into account not only anticipated current account deficits but also “ liquidity at risk ” arising from unanticipated capital movements ; • a judicious policy for management of the capital account. short - term banking capital for financing investments and growth has to be avoided, while foreign direct investment and portfolio investment have to be encouraged. the point is simply that in respect of foreign direct investment and portfolio investment, there is a “ cost ” involved for the foreign investor in quickly reversing such flows. this cost is not present in respect of fixed