luxembourg we still have significant gaps, particularly with respect to institutional reforms and the adjustment of our model of supervision. in this regard, i am aware that there is no perfect supervisory model, nevertheless, we must try to profit from the recent experiences of other neighbour countries in order to mitigate systemic vulnerabilities and enhance financial stability. as you know, different countries ; u. k., belgium, france and recently switzerland, have adjusted their model to be more integrated. so it would appear self - evident that central banks, given their role as lenders of last resort and their responsibilities in monetary policy and liquidity management, should play a key role in safeguarding financial stability. however, the lender of last resort might be the most important backstop during periods of financial turbulences, nevertheless this should not be a “ free lunch ”. in order to fulfill their responsibilities effectively, central banks should be equipped with a clear and independent macro - prudential mandate and toolbox to assess and mitigate macro - prudential risks at the systemic level. this proposal is coherent with the bis central bankers ’ speeches recommendations of the de larosiere report which attributed an umbrella role to central banks in the supervisory framework. in this regard, it must be assured that national macro - prudential authorities have the flexibility to adjust regulatory requirements over the business cycle. thus, i welcome the commission ’ s proposal regarding crd iv in particular, the countercyclical capital buffer. however, the macro - prudential regime must find a balance between preserving national flexibility – as the business cycle varies between european countries – and maintaining a level playing field so as not to distort competition within the single market. as i mentioned, aside from the institutional arrangements, many challenges remain to be resolved. the g - 20 and the european commission have taken some initiatives in addressing the regulatory deficiencies highlighted by the crisis. these include basel iii, otc derivatives, the shadow banking system, high frequency trading, central counterparties ( ccps ) and crisis resolution mechanisms, etc... such proposals remain at an early stage and still face the challenges of jurisdictional realities. let me now focus on some specific issues that may arise under the new regulatory regime. with respect to liquidity, two new instruments have been proposed i. e. the liquidity coverage ratio ( lcr ) and the net stable funding ratio ( nsfr ). these quantities are intended to improve financial institutions ’ liquidity risk profiles

of a myriad of small states etc. the present model, based on fitting together certain areas of policy making, retaining others and giving a proportionally larger say in decision - making to smaller countries is two generations old. did it serve us well or do we have to roll it back? the chief economist of the london based centre for european reform, katinka barysch, questions whether in the current political climate, eu member states would be ready to reaffirm their support for the “ four freedoms of capital, goods, services and people, which president klaus strongly endorses. president klaus, you said your vision is not about closing ourselves in. is protectionism not the most imminent danger? barysch argues that " the nature of the single market and competition has changed since enlargement ", pointing out that the much wider gulf between highwage and low - wage countries has fuelled fears among workers in old europe. president klaus, few have been able to stimulate our thinking about our socio - economic and political environment in a way you do. you abhor intellectual cosiness. we are eager to listen to you. we have a fascinating evening before us, especially since president klaus has kindly agreed to reply to questions at the end of his speech. mr. klaus, you have the floor.