christian noyer : a review of the financial crisis speech by mr christian noyer, governor of the bank of france, at the hearing before the finance commission of the assemblee nationale, paris, 7 october 2008 ( updated 15 october 2008 ). * 1. * * a number of comments on the developments of the past month the bankruptcy of the investment bank lehman brothers on 15 september 2008 marked a crucial turning point in the crisis. the direct consequences of this failure, involving over usd 600 billion in assets, appear to have been correctly contained and managed up to now. nevertheless, it exacerbated the crisis of confidence, with the following major repercussions : • first, interbank markets increasingly seized up, because banks perceived there to be a rise in counterparty risk. overnight dollar interbank rates rose to particularly high levels of close to 7 % ; • second, significant pressure on other money market segments, in particular the us commercial paper market, where yields on 30 - day paper have been climbing since mid - september to reach levels close to those observed at the end of last year ; • lastly, the deterioration in the financial position of aig, the largest us insurer, followed by its exceptional bailout. a two - pronged rescue plan was implemented : on the one hand, the fed made an usd 85 billion loan at a penalty rate of three - month libor plus 850 basis points and, on the other, the us government took a 79. 9 % stake in the company. this exceptional intervention was necessary because aig had engaged in the highly risky business of selling credit protection over the past few years, which left it vulnerable and very exposed to a turnaround in the us housing market. the uncertainty stemming from this situation gave rise to the risk of a domino effect, affecting one financial institution after the next. fears that this effect could be fuelled by price manipulations and speculation resulted in a restriction of short selling, first in the united states and then in many other countries including france, the united kingdom, belgium, the netherlands, italy, germany, austria and australia. it was against this backdrop that the idea of an " overall solution " emerged, marking a change in strategy compared to the case - by - case approach that had prevailed until then. this was the underlying rationale for the paulson plan adopted on 3 october. three remarks on the latter : • the general idea behind the plan is for the treasury to purchase currently illiquid assets. it

jean - claude trichet : the regulatory and supervisory reform in europe speech by mr jean - claude trichet, president of the european central bank, at the eurofi financial forum 2009, gothenborg, 30 september 2009. * * * ladies and gentlemen, it is a pleasure to be here among you and to say a few words of introduction before this distinguished panel. the purpose of my intervention is to lay out the main issues for our discussion. • substantive progress has been made in the regulatory and supervisory reform as a response to the financial crisis. a remarkable amount of technical work has been undertaken in a demanding timeframe. • all relevant initiatives have been coordinated globally, and the european union has been a frontrunner in a number key areas. let me mention three of them : credit rating agencies, hedge funds and compensation practices. • on credit rating agencies, the eu has already adopted regulation that will subject credit rating agencies to mandatory registration and oversight, to increase transparency and reduce conflicts of interest in the rating process. • with regard to hedge funds, the european commission has proposed a directive on alternative investment fund managers. this proposal, which is currently under debate, provides that alternative investment fund managers be subject to authorisation and harmonised regulatory standards, including minimum capital, as well as disclosure requirements. • on compensation practices, the european commission was among the first to incorporate in a directive the principles developed by the financial stability board ( fsb ) for sound compensation practices. moreover, the eu has been driving the international agenda in developing further implementation standards that will align compensation practices with long - term value creation, and discourage excessive risk - taking in the short - term. as a result, the g20 summit in pittsburgh calls on banks to defer bonus payments, disallow guaranteed bonuses, and introduce a claw - back clause. • overall, agreement has been reached globally on a comprehensive set of measures in response to the crisis. the capital framework has been strengthened by introducing stricter requirements for the treatment of securitisation exposures and off - balance sheet vehicles, as well as for credit risk in the trading book. disclosure requirements have been improved, to reduce uncertainty about banks ’ overall exposures in these areas. guidance has been published to address the shortcomings in banks ’ risk management practices. finally, international cooperation has been very strongly reinforced and supervisory colleges for large complex financial groups have been established. while a lot has been achieved, a lot remains to be done. this is no time for