10. Summarise the article, using the words and phrases given below:

to be widely criticized for smth; to reject the popularly prescribed remedies; to set a clear inflation target; to cloud matters; to reach one’s decisions; to increase the focus on national differences; to undermine the bank's credibility; to develop blueprints; to cede political control; to reduce tension; to outweigh; to pose problems; to handle a crisis; to relinquish national control; to act prudently.

10. Work as one group. Speak about the importance of the single currency for the bank supervision reform in Europe

10. Study the text in groups.Argue for or against the following:

From an economic point of view, it would be best if bank supervision were centralized, either under the ECB or in a new, independent European regulator.

Text 2 European Bank’s Monetary Policy

The drafters of financial laws in Brussels have a horrible three years ahead.

The challenge, apart from applying recent recommendations on the regulation of securities markets in the European Union, is to turn 560 pages of guidance on international banking supervision into EU law. Not only that, the law must cover securities houses and investment firms as well as banks.

In January the Basle committee on banking supervision, which represents bank supervisors in big industrial countries, produced refined proposals that will revolutionize the supervision of the world's biggest banks. Instead of setting a fixed ratio of capital to so-called risk assets, the new framework, dubbed Basle 2, will allow the most sophisticated banks to use their own measures of risk to calibrate the amount of capital they must set aside.

Banks already use internal models to calculate market risk. They are developing new techniques to assess other risks they run, broadly known as operational risk. Supervisors will review this process continuously, adjusting capital requirements above the minimum the bank has calculated, with rewards for good behaviour. The goal is a safer, more market-driven - and hence more efficient - banking sector.

The previous Basle framework, set in 1988, laid down clear capital charges for credit exposures according to whether the borrower was a country, a bank, or a non-bank. It did much to encourage banks worldwide to build a sounder capital base, but it was crude. It tempted some banks, especially in Japan and South Korea, to make loans on the basis of the capital charge the loans attracted rather than of banking prudence, with disastrous results. Supervisors hope that Basle 2 will reduce such distortions.

The nightmare on the other side of the duvet is the task of translating a regime - which is still evolving and which is aimed at the top tier of international banks - into European law for all financial firms. Basle 2 must be turned into a third capital-adequacy directive (CAD 3), which may overlap with a bunch of other directives on solvency, large exposures and capital. These will need to be cancelled or amended. It must also have relevance to hundreds of small European banks and (mainly British) investment firms. Then the draft must go through the European Parliament and the European Council of Ministers before it becomes a directive; after which it must be written into the rulebook of each member state, often with new legislation.

Basle 2 has problems of its own, to do with the calibration of risk, and with fierce and sometimes philosophical arguments about the definition of operational risk. There is also the danger that banks will have to scramble for new capital in the teeth of some future recession. Studies are in progress, and horse-trading between the big banks and regulators has only just begun. So this is not a good time to be enshrining raw and untested concepts into European law.

The European Commission’s consultative document has the same ambitious plans for risk measurement, but it also highlights the special need for banks to finance small and medium-size enterprises (SMES), most of which have no public credit rating (Basle 2 relies on public ratings as well as ratings used internally by banks). An increased capital charge for Europe’s small banks, or heavier reporting requirements, could well raise the cost of borrowing for SMES in Europe.