have a general agreement that not all sifis are the same or pose the same degree of risk to the system, and that the framework should recognize this. along the same lines, the idea is to have a system which builds in a sufficient degree of supervisory judgement to reflect aspects that cannot be quantified, but balanced with “ constrained discretion ” and a peer review process to ensure that there is a level playing field. and i think, and others think, that the resolvability of an institution should be taken into account in determining the systemic risk of a global sifi. for instance, a proper “ living will ” is a mechanism to reduce the impact of a bank failure and, therefore, to reduce the systemic risk these institutions pose. finally, the fsb places strong emphasis on the importance of intensive supervision. the aspect of the fsb approach to sifis which has attracted most attention is the setting of higher capital requirements ( or “ loss absorbing capacity ” ) for sifis. we would be extremely naive to think that extra capital is the answer to systemic risk. holding extra capital does not resolve the problems of poor management or ill - advised risk taking. and we will never be able to require sifis to hold a level of capital sufficient to absorb the huge costs related to their potential bankruptcy. but capital does help to reinforce the system, because it provides an incentive for institutions to reduce the risk that they pose to the system. banks which show that they are less risky should be subject to lower requirements, thereby incentivizing responsible and safe behaviour. instead, those banks that pose higher risks should meet more stringent requirements. let me stress, yet again, that my point is not about having all global banks following this organizational philosophy. on the contrary, i do believe a diversity of institutions from either a business model or an organizational perspective is needed to ensure that financial globalization promotes global growth. but we should also be aware that, if the regulatory framework in areas such as sifis capital surcharge is ill defined, we may end up promoting the convergence of global banks towards the most complex business model of the current landscape. bis central bankers ’ speeches in this respect, i would like to draw your attention to the fact that we have recently raised core capital requirements – to 8 % – for all institutions operating in spain, in order to boost the stability of the financial system. however, we have also gone a step further and placed an additional 2 % charge

sophocles wrote in one of his tragedies that “ we cannot call a mortal being happy until he ’ s passed beyond life free from pain ”. following the same principle of precaution, neither supervisors nor credit institutions should succumb to the temptation of unfounded optimism about the future. this is the reason why we will continue pushing for a very intense supervisory process for these global institutions and we will ensure that they are complying with the highest standards in any field. supervisors can make several different types of mistakes, but one they cannot afford is complacency. thank you very much for your time and patience. bis central bankers ’ speeches