The European League for Economic Cooperation has been, ever since its foundation in 1946, an independent network of business people who put their knowledge and influence together to deepen European integration. The League has stood out over the decades for a lot of significant reasons, including the very diverse nature of its membership and their interests, as well as a specific concern for independence in formulating their opinions. It is exactly this diversity and independence that prompts ELEC to ask the right questions and, in the answers it provides, to give priority to the common European interest. I salute the close cooperation between government officials in the region with high European officials, as well as, with the private sector and prestigious organizations such as ELEC. The Prime Minister of Romania, Mr. Dacian Ciolos, will have a brief address on this topic. Mr. Achim Irimescu, Minister for Agriculture and Rural Development will chair the round table on agriculture, together with his counterpart from the Republic of Moldova, Minister Eduard Grama and other renowned authorities who are ready to share their expertise on the factors that generate food insecurity in the extended Black Sea region in the context of the 21st century challenges. Mr. Vasile Iuga, Partner at PricewaterhouseCoopers will chair the round table on energy security and together with prominent experts will focus on long term development of energy networks in Central and Eastern Europe. Ladies and Gentlemen, Now, a few words about the topic of this conference.

Such coordination failure may arise not because the depositors or the interbank market participants think the bank is likely to be insolvent, but because they anticipate others will withdraw.2 The rationale of liquidity requirements is that they reduce the impact of uncertainty on the bank risk profile, since they allow the bank to withstand larger withdrawals. LOLR and deposit insurance are other ways to achieve the same means: mitigating the risk of a run. The difference is that liquidity requirements are internalised, while LOLR and deposit insurance are externalised to the central bank and to the taxpayers, respectively. Another difference is that liquidity requirements and deposit insurance exert their effects ex ante while LOLR happens after the fact. An additional micro-prudential benefit derived from liquidity requirements relates to a special role of liquid assets. By maintaining liquidity buffers in advance, banks commit to removing solvency risk from a portion of their portfolio. This limits solvency risk and encourages good risk management, acting as a prudential regulatory tool alongside other requirements, such as capital buffers or bail-inable debt, that also exert discipline on bank risk-taking behaviour.3 A counterargument is however that holding a large balance of liquid assets gives bank management too much discretion and can thus create agency problems.4 Liquidity standards should also be designed to mitigate adverse effects owing to inherently systemic characteristics of a liquidity crisis. The reaction of one bank to liquidity strains might create major liquidity strains for other banks.