. the evidence is clear : banks that are safe and sound are better equipped to lend to the real economy. banks that are well capitalised and resilient are better placed to compete in international financial markets. and banks that have state - of - the - art governance 6 / 7 bis - central bankers'speeches structures have better forward - looking risk assessments, can more easily shield themselves against unforeseen events, and can continue to provide services to their customers, including during periods of structural change and in times of crisis. 1 yellen, j. l. ( 2024 ), " the importance and strength of the transatlantic alliance ", remarks at frankfurt school of finance and management, 21 may. 2 veron, n. ( 2020 ), " banking regulation in the euro area : germany is different ", 11 may. 3 bafin ( 2021 ), " reform as a long - distance race ", 8 december. 4 research shows that unresolved npls are associated with lower output growth and slower dynamic recovery. see ari, a., chen, s. and ratnovski, l. ( 2019 ), " the dynamics of non - performing loans during banking crises : a new database ", imf working papers, no 19 / 272, international monetary fund, december. 5 tuominen, a. ( 2024 ), interview with il sole 24 ore, 28 march. 6 elderson, f. ( 2023 ), " powers, ability and willingness to act – the mainstay of effective banking supervision ", speech at the house of the euro, brussels, 7 december. 7 / 7 bis - central bankers'speeches

jean - claude trichet : global capital – surrender of national policies? lessons from the recent events in credit markets speech by mr jean - claude trichet, president of the european central bank, at the 17th frankfurt european banking congress “ global capital – threat or salvation? ”, frankfurt am main, 23 november 2007. * * * ladies and gentlemen, let me start off with one general remark : the present significant market correction with episodes of turbulences should not come as a surprise to us. the ecb, as well as the other central banks, has issued warnings in the past on the global phenomenon of under - pricing of risks. in many respects the present episode can be interpreted as bringing to the forefront anomalies and structural deficiencies which we have identified earlier. while it is too early to make a full assessment, i believe there are some first provisional lessons which can already be drawn at the current stage. a lesson that can be drawn is that the growing complexity of instruments has to be monitored very closely. structured credit markets are exposed to valuation problems, which make the market very vulnerable to a shift in investor sentiment. in the absence of reliable market prices, instruments need to be valued by models. but estimates which the models produce are highly sensitive to underlying assumptions. mounting losses in residential mortgage backed securities ( rmbs ) backed by us sub - prime loans have seemed to trigger a wide loss of confidence in the correctness of underlying assumptions and therefore in the valuation of structured credit products more generally. this apparently has set a vicious circle in force in which heightened uncertainty about the future value of complex assets and rising risk aversion caused many investors to withdraw from the market. prices dropped massively, and investors incurred large unexpected losses, contributing to further pressure to sell. a second lesson that can be drawn is that structured credit markets provide a pressing example of the need to increase transparency in financial markets. that the market disruption spilled over into interbank markets can be explained by another key shortcoming of structured credit markets, namely the opacity of exposures of financial institutions to complex instruments and off - balance sheet vehicles. this lack of transparency about exposures of other banks exacerbated counterparty risk concerns, impairing the well functioning of interbank markets. in periods of turbulences, whatever the origin of those turbulences, opacity and absence of transparency are a recipe for propagation of turmoil and generalised contagion. third, the recent events have stressed again the particular role