andrew crockett : speech upon receiving the european banker of the year 2001 award speech by mr andrew crockett, general manager of the bank for international settlements and chairman of the financial stability forum, upon receiving the european banker of the year 2001 award, frankfurt, 25 april 2001. * * * lord mayor, president duisenberg, distinguished guests. let me begin by saying how honoured i feel to be chosen to receive this prestigious award. it is a particular honour to follow in the footsteps of such a distinguished group of predecessors, and to receive the award from such an eminent central banker as wim duisenberg, whom i have been proud to count as a friend and mentor for many years. and it is a pleasure to be here in frankfurt for the ceremony, and to have present so many friends and colleagues from the german banking community. i realise that awards such as this one are all, to some extent, proxy awards. that is particularly true in my case. my presence here symbolises the growing importance of the role played by central banks in our economies, and the position of the bis as the instrument of international central bank cooperation. for that, many people deserve credit, not least wim duisenberg, past president of the bis, and both his predecessor and mine in our respective functions, alexandre lamfalussy. the bis has become widely associated in the public mind with banking supervision. if i say a few words on this topic today, it should not detract from the crucial part the bis has played in central banks ’ efforts to restore price stability, to say nothing of its role over many years as a patient promoter of european monetary cooperation. when i began my career, some 35 years ago, banks operated in a much less complex environment than they do today. in the mid - 1960s, banks were the predominant financial institutions in largely domestic markets. they had a common business model in which traditional core services were jointly provided. competition was limited by custom and regulation. branches were the key vehicle for attracting and servicing clients. cross - border banking was in its infancy. by now, much of this has changed. business models have become more diverse : some banks offer a full range of services to wholesale and retail clients, others specialise in niche products. the products that used to be offered jointly by banks can now be unbundled and provided separately by independent service providers who may not themselves be banks. this has gone hand in hand with an enormous increase in competition,

that lies behind the fluctuations in asset prices. incentives are needed to encourage banks and other financial institutions to build up capital cushions in good times, in order better to protect themselves, and the wider economy, when the bad times arrive. we certainly cannot be satisfied with the volatile financial cycles that seem to characterise liberalised financial systems. let me end by saying something about the international dimension. it has become a commonplace to say that we live in a globalised economy. nowhere is this more true than in the financial system. an integrated global financial system has brought many advantages : capital is mobilised and allocated more efficiently ; the spread of technological advance is more rapid ; and disciplines over unsustainable policies are more effective. yet globalisation has also brought deeper and more widespread financial crises. contagion has meant that disturbances that were previously localised now have wider repercussions. this places a greater premium on effective international mechanisms of crisis prevention and response. recognition of this fact lies behind the ongoing debate on strengthening the international financial architecture. today ’ s financial architecture is based on the operation of liberalised markets. it is market forces that determine such key features of the international financial system as exchange rates, the availability of liquidity, capital flows and the balance of payments adjustment process. when instability occurs, it can usually be traced to market imperfections and failures. to address these issues, the international community has embarked on an ambitious effort to develop standards and codes of best practice in financial markets. these codes cover the prudential behaviour of financial intermediaries, such as banks ; the transparency requirements for efficient market functioning ; and the need for an effective financial infrastructure in contract law, accounting, payments systems, and so on. success in this endeavour will require ongoing cooperation across regulatory jurisdictions, and between the public and private sectors. the financial stability forum, set up following recommendations by hans tietmeyer, has the capacity to make such cooperation a reality. if it does so, i believe it can make a substantial contribution to building a more robust international financial system. all this is a substantial agenda for the future. it is an agenda that requires the common efforts of the private sector, which provide the innovative spark for the development of new techniques, and the public sector, which needs to make sure that the right incentives are in place to allow efficiency and stability to be mutually consistent.