good. nevertheless, central banks can play a productive role in safeguarding financial stability. it certainly makes sense to harness central banks ’ high level of expertise with regard to financial stability risks. however, the " weapon of choice " for combatting these risks is not monetary policy – it is macroprudential policy. in his first speech as a governor at the federal reserve board, ben bernanke demanded : " use the right tool for the job. " 8 to stretch the analogy with the african fauna further, this is something we could compare to the feeding habits of zebra and wildebeest. they graze alongside each other, of course, but they actually feed from different grass heights, with zebra preferring taller grass and wildebeest focusing on short grass. researchers have attributed this selection to anatomic differences in mouth dimensions. 9 in a similar vein, macroprudential instruments can be used in a far more targeted way than monetary policy. they cut the grass at a different level, so to speak. this is of particular use with respect to the euro area. macroprudential tools can be employed at the level of member countries to combat problematic developments in national financial systems – developments that cannot be counteracted by the single monetary policy. one of the instruments to address exuberance in the financial system are countercyclical capital buffers. moreover, as real estate markets have underscored their destabilising potential during the last crisis, many tools are geared explicitly towards this market. caps on the loan - to - value or debt - to - income ratios are two examples of instruments that allow for a tempering of the demand for mortgages. however, if we are to deploy these new policy instruments, we need to gain a better understanding of how they affect macroeconomic performance and interact with monetary policy. a forthcoming bundesbank discussion paper points out the danger of " financial dominance ". within a dsge model, vivien lewis and markus roth demonstrate that, if macroprudential policy is too lax, monetary policy may be forced to do the job by driving inflation above its price stability target and reducing the real burden of private debt. 10 thus a stringent macroprudential reaction to financial stability risks is also a means to protect monetary policy. to ascertain when we should adjust macroprudential tools, and by how much, we need to know how effective these tools are, and whether the transmission channel is subject to lags

and responsibilities. for one thing, we have sovereign measures issued by the financial supervisor : regulatory measures concerning institutions, especially general decrees and administrative acts, including auditing orders. for another, the central bank is responsible for the ongoing monitoring of institutions, including the evaluation of documents submitted by institutions and external auditors ’ reports, as well as performing and evaluating audits of banking operations. but an efficient division of labour also needs additional guidelines or cooperation agreements which describe supervisory instruments in more detail and lay down procedures. such guidelines or agreements relate to, for example, supervisory planning, meetings with senior management, drawing up banks ’ risk profiles but also further details of reporting and notification systems. i think it is fair to say that this model of a formalised close cooperation worked pretty well in the crisis. still, there is a lingering debate in germany on a more far - reaching reform of banking supervision. as you may be aware, this will probably also be a topic for the new coalition government that is about to be formed. the bundesbank stands ready to assume greater responsibilities in supervision. therefore, the debate should be on how to design the supervisory framework for the future. i expect that the bundesbank would be closely involved in any reform initiative right from the outset and that we would be given the opportunity to provide our own input in designing a revised supervisory structure in germany. we are convinced that the independence of monetary policy and a more prominent role in the supervision of banks and insurance companies can be reconciled. any such reform must contribute to aligning further the national and european supervisory structures as they evolve. success factors for level 3 committees evolving towards 3 eu authorities? first, i would like to say that i explicitly welcome the commission proposals on the design of the new supervisory architecture in the eu. given the complexity of the whole matter, the proposals are a very helpful and crucial milestone. they now have to be analysed and discussed thoroughly. we have a unique opportunity to reshape the supervision of the financial system in order to make it more resilient. therefore, we have to be very careful to avoid blind spots as well as inefficient overlaps in the competencies and the practical work of the various institutions involved in the supervisory process, at the national as well as at the eu level. according to the ecofin conclusions, the “ european system of financial supervisors ” should be established as an operational network with shared and mutually reinforcing responsibilities. at the eu level, we