The vulnerability of the world financial system to future shocks was underlined during a session in which speakers were asked whether they were inevitable.

Although most speakers did not rule out another global economic crisis, they said an open flow of information and the willingness of countries to correct imbalances early should lessen the impact.

Five areas that posed danger to the system were listed by Jonathan Fried, Senior Assistant Deputy Minister of Finance and G7 Deputy for Canada. They were:

· Japan's deflationary environment;
· Shifting dynamics in the financial arena associated with the advent of the euro;
· Long-term implications of the imbalance in the US current account;
· Further political risk in Argentina spreading to regional actors;
· The impact on the world economy of the current unrest in the Middle East.

Guillermo de la Dehesa Romero, Vice-Chairman of Goldman Sachs Europe, said the world has developed early-warning systems that give greater immunity to financial shocks than in the past. Lending risk was more widely spread out and financial derivatives allowed investors to buy protection against volatility.

Session chairman Erik Belfrage, Senior Vice President, Skandinaviska Enskilda Banken, Sweden, said international efforts to strengthen the financial system should be accompanied by sound domestic economic policies and robust financial policies.

Liu Mingkang, President of the Bank of China, criticized the Japanese government for offering more talk than action in tackling the country's problems, but he did not expect Japan to trigger a global crisis.

Mr Liu said China's economic achievements were connected to success in pursuing sound macro-economic policies which, combined with reform in the legal and financial regulatory framework, had attracted foreign direct investment.

György Surányi, former President of the National Bank of Hungary, and currently Head of Multinational Banking with the IntesaBci Group in Hungary, was concerned about the adverse effect on economic performance in Central and Eastern Europe of a possible rapid appreciation of the region's currencies.

Bruce Misamore, Vice-Chairman and Chief Financial Officer of YUKOS in Russia, said reforms under President Vladimir Putin that had made Russia more attractive to investors. He exhorted Russian authorities to institute structural reforms in the banking sector because "Russia has a banking sector, but Russia does not have a banking system."

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