domestic financial markets normally also leads to a substantial use of the currency by foreign investors. at the same time country - specific risk features such as political risks can reduce the international use of the currency. let me emphasise that the euro is backed by an environment of monetary stability with a medium - term orientation and which may be seen as providing sound conditions for the further enhancement of the international role of the euro. clearly, the disappearance of 11 national currencies and the introduction of the euro as a major international currency had an immediate impact on the turnover and focus of attention in the global foreign exchange markets. this has been reflected, for example, in relatively active and liquid euro / dollar trading in the foreign exchange market since the launch of the new currency. the euro can also be expected to become an attractive currency for the investment of official reserves. moreover, available information concerning the private use of the euro as a currency of denomination for debt securities indicates a significant increase in the share of international debt markets in the first quarter of 1999. this supports the view that in the medium term financial markets see the euro as a stable currency. moreover, it is widely recognised that in the medium to long term exchange rates follow a path determined by fundamental factors such as price and economic developments. thus, internal price stability should serve as an anchor for the development of the euro ’ s external value in the medium term. indeed, a stability - oriented monetary policy protecting the purchasing power of the euro is the basis of a solid and stable currency over the medium term. as yet it is too early to predict how long it will take for the euro to be considered as a truly international currency similar to the us dollar. the eurosystem neither promotes nor hinders the development of the euro as an international currency. we consider that the international role of the euro should develop through the interaction of market forces. concluding remarks to conclude, the success enjoyed by the euro in its first half year can without doubt be attributed to a number of factors. above all, the member states were successful in their efforts to achieve a smooth changeover to the euro. the independence of the ecb and the clear mandate to maintain price stability are crucial to ensuring a high degree of credibility of the eurosystem ’ s monetary policy. without the confidence of international financial markets and the permanent support of banks and financial institutions in the euro area and beyond, the single currency in europe could not have become a reality. i am confident that we can expect also a continued

which itself has become more risk - sensitive. and let us not forget that, in some cases, the standardised approaches have become less costly in terms of capital. at global level, the capital requirements from standardised approaches have been reduced by about 2 % on average. mortgages and corporate lending make up the majority of these reductions. so, basel iii does keep risk sensitivity on board. it acknowledges, though, that there are limits to internal models. it provides safeguards to restore trust in risk - based capital requirements. does this mean that basel iii is the perfect standard – the philosopher ’ s stone of banking regulation? well, basel iii is a global standard, and across the world, financial sectors differ greatly. just think of real estate financing and how differently it is treated in europe compared with the united states. thus, a global standard cannot suit everyone perfectly. the key is to find an acceptable compromise ; the alternative would be to have no global standard, and that would definitely be worse. the output floor in particular is one such compromise. what impact will the final basel iii package have on banks – and on their business models and their capital? the rules are not neutral. the bottom - up safeguards in basel iii, including the input floors, will impact on risk weights in some business areas. certain retail credit card exposures are one example. the top - down output floor affects overall capital requirements, depending on the overall portfolio composition of a bank. for example, our analysis suggests that the difference between internal ratings - based and standardised risk weights tends to be relatively large in certain segments of real - estate markets where historical loss rates are exceptionally low. the output floor tends to be more binding for banks which are heavily engaged in these markets. overall, it is hard to predict how business models will evolve. this depends not only on regulation, but also on many other factors, including the future path of profitability in different business areas, the pricing power of banks and, eventually, how banks will adapt their business models. now what about additional capital requirements? what about the banks ’ claim that the burden might be too heavy for them? well, there are two things to bear in mind. first, there will be a long transition period. this is at the heart of the overall compromise which 2 / 3 bis central bankers'speeches paved the way for finalising basel iii. this transition period runs right through to 2027. it gives banks and legislators time to implement all the changes introduced