thus reduces the likelihood of a government bail - out. this will be essential in breaking the link between the balance sheets of banks and public finances. but even a sound banking union will not be sufficient to reach our goal of making the financial system more stable. apart from supervision and resolution, we have to look at bank regulation. the current regulatory framework, too, promotes this nexus between bank and sovereigns because it encourages banks to invest in sovereign debt. this reinforces the “ doom loop ” between the sovereign sector and the banking system. should doubts about the sustainability of government debt arise, the national banking sector will also be negatively affected. this is particularly relevant in the european monetary union as european banks often only invest in the sovereign bonds of their home countries. the current regulatory framework is biased towards sovereign debt in several ways. generally, bank exposures to a single counterparty are limited to a quarter of a bank ’ s eligible capital. but this does not apply to exposures to sovereigns, which are exempt from such rules. furthermore, sovereign exposures are also privileged by low or zero capital requirements, as they are seen as more or less risk - free. reassessing the regulatory treatment of financial institutions ’ sovereign exposures is crucial. more effective financial market regulation is necessary to ensure that a “ doom loop ” between sovereigns and banks cannot emerge. but let me come back to fragmentation. we do not only observe natural differences and fragmentation in financial markets, but also in the real economy. and i would claim that we should not interpret this generally as a malfunction there either. fragmentation also exists in the real economy germany has been criticized for its relatively high current account surpluses. the current account balance in germany is, however, not the result of distinct government policies or even central economic planning. it is, first and foremost, the result of market - driven processes reflecting the investment and saving decisions of millions of market participants. and they simply reflect structural causes. for countries like germany, a current account surplus helps to absorb future burdens induced by its demographic development. in this sense, current account surpluses are not an economic harm but an economic asset. neither fellow european monetary union countries nor the european monetary union as a whole would be better off if germany were to be weakened artificially. especially, since the relatively strong balance sheets of german households, businesses, and of the public sector provide a certain degree of stability not only for germany, but for the euro area as a whole.

markets with implications for the exchange rate, inflation, and the risk to financial stability. in light of this, policymakers in emerging markets would find it more difficult to use traditional instruments to achieve domestic objectives. they must be more wary of the buildup of financial imbalances and may even have to rethink the exchange rate management strategy. on a larger scale, uncertainties pertaining to the post - crisis international monetary and reserve currency system – the one in which dominant currencies are likely to grow weaker and newly emerging currencies grow stronger – will also pose important challenges to monetary, exchange rate, and reserve management policies. ladies and gentlemen, to tackle some of these challenges, we are very fortunate to have with us today many distinguished speakers from both academia and central banks. in the morning sessions, we will hear from the academic point of view the implications of the changing financial and regulatory landscape. during lunch time, our keynote speaker will share his insights on the future of the international monetary system and what implications entail for policymakers. later in the afternoon, we hope to bridge academic thinking with practical policy considerations. let me conclude by saying that it is impossible to have answers to all the big questions in a one - day conference like this. but i am sure we can contribute to the better understanding of many difficult issues and come up with useful policy recommendations. most of all, i hope that this forum will be followed by continuing discussions and cooperation among all participants, which would be a true measure of success of the conference. i wish you all a fruitful meeting and memorable stay in bangkok. thank you.