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The emergence of the Euro can be characterised by the growing need for co-operation among currency zones, as highlighted by the recent financial market turmoil, Malcolm Knight, General Manager of the BIS, said.
The introduction of the Euro led to the development of deep and liquid European financial markets which supported the stability and allocative efficiency of the euro area financial system, he said in his key note address to the Brussels Economic Forum.
However, there are some key policy challenges that need to be solved, he underlined. The need for greater co-ordination of financial regulation and supervision across financial institutions, markets and national borders obviously results from the various cross-border linkages that derive from the existence of a number of different international currencies and the fact that many financial institutions now act globally, he said.
Furthermore, recent experience showed that central banks can no longer focus on liquidity conditions in markets for domestic currency alone, because liquidity problems in foreign currency markets can spill over to domestic financial markets, he said noting that the provision of liquidity to the domestic financial system now requires greater international co-ordination.