of more robust infrastructure. adoption of these measures should further reinforce the ability of basel iii standards to reduce the probability of crises and thereby increase net benefits. see c. meh and k. moran, “ the role of bank capital in the propagation of shocks ”, journal of economic dynamics and control 34 : 555 – 76 ( 2010 ) ; i. christensen, c. meh, and k. moran, “ bank leverage regulation and macroeconomic dynamics ”, forthcoming bank of canada working paper ( 2010 ) ; a. dib, “ banks, credit market frictions, and business cycles ”, forthcoming bank of canada working paper ( 2010 ). third, the totality of the g - 20 reforms has the potential to shift the balance between resiliency and competition. by creating a system that is robust to the failure of a single firm, reforms could increase the competitive intensity in the financial services sector, with attendant benefits. a financial sector that is less volatile, less prone to debilitating crises, and more robust in the face of adverse shocks is likely to be viewed more favourably by investors and attract the investment needed to continue to expand in a sustainable manner. by reducing moral hazard, incumbents will also enjoy fewer oligopolistic privileges behind regulatory barriers to entry. greater competition commonly leads to more innovative and diverse strategies, which would further promote resiliency of the system. greater competition and safer banks may also contribute to lower expected return on equity ( roe ) for financial institutions. this, in turn, could help offset the costs and increase the net benefits discussed earlier. these gains from competition could be considerable. the financial services sector earns a 50 per cent higher return on equity than the economy - wide average. if greater competition leads to a one - percentage - point decline in the roe ( through a decline in spreads ), the estimated cost from a one - percentage point increase in capital would be completely offset. conclusion the fundamental objective of the reforms is to create a system that efficiently supports economic growth while providing financial consumers with choice. the system must be robust to shocks, dampening, rather than amplifying, their effect on the real economy. it should also support sensible innovation. the system needs stable banks and robust markets, since both play a central role in financing, and, if properly structured, each can support the other. this means ensuring that individual financial institutions are stronger and less systemically important, that more options for liquidity are available in all states of the

philipp m hildebrand : open world - switzerland open to the world summary of a speech by dr philipp m hildebrand, member of the governing board of the swiss national bank, at the swiss economic forum, thun, 7 may 2004. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * globalisation - the worldwide exchange of production factors, goods, technologies and ideas - is a process that has evolved in different ways and degrees ever since humankind can remember. technological progress is the actual driving force behind globalisation. it thus becomes possible to reduce costs through increasing specialisation and the best use of comparative advantages. the process of globalisation, however, is restricted to some extent by national and international legal frameworks. despite overall positive and widespread net effects, globalisation is, however, frequently not accepted due to adjustment costs arising for certain global players. with its successful export sector and its comparatively attractive local conditions, particularly the excellent infrastructure and the flexible labour market, switzerland has the potential to benefit from the continuing globalisation in future as well. a necessary condition for this, however, is a rise in productivity and, as a result, enhanced competitiveness of the domestic sector. with international competitive pressure intensifying, insulating itself or merely adhering to the status quo are no options for switzerland in the long term. this would lead to considerable losses in social security and growth and threaten the long - term survival of the country ’ s social institutions.