the head. through the capital requirements directive implemented in 2013 and the associated regulation, we are setting new capital and liquidity standards in europe. the most recent reforms, which implement major aspects of the basel iii framework already agreed upon, have made a major contribution to boosting the longterm stability of the european financial system. the banking lobby never tires of saying that additional regulatory requirements put considerable pressure on their institutions. i ’ d like to say two things here. first, the reforms are not an end in themselves – and they are certainly not the result of blindly taking action for the sake of it. quite the opposite : they are necessary and consistent. necessary because the global financial crisis cast serious doubt on the functional viability of our financial system. “ carrying on ” as we were is simply not an option. and the reforms are consistent in that they specifically address the aspects that were exposed as being particular vulnerabilities by the crisis. this is why we cannot and will not water down fundamental regulatory principles and requirements. but on the other hand, the following point is equally important in my eyes. supervisors are keeping a very close eye on the effects that changes in regulatory requirements are having on banks and savings banks. and, indeed, we are seeing a considerable need for adjustment for many institutions, particularly in terms of their it infrastructure. this poses a challenge for smaller institutions, in particular, as they cannot exploit economies of scale to the same extent as their larger competitors. at the same time, the staff involved in implementing regulatory tasks are being asked to meet ever higher qualitative and quantitative requirements. to name just one example, let ’ s take a look at a study carried out by the federal reserve bank in minneapolis on the effects of regulation on small american banks. the thrust of this study was to find out the extent to which these institutions could cope with rising personnel costs resulting from stricter regulation. the results are sobering. an additional requirement of just two full - time positions would send around 25 % of these small institutions into the red. 6 this example shows that we, as supervisors, also need to be careful that regulation does not fundamentally overwhelm any group of institutions - either in the united states or here in germany. for one thing is very clear : a healthy system of banks and savings banks depends in part on its diversity – and this includes smaller institutions just as much as the large ones. this is quite simply why regulatory reform is not just a challenge for the banking industry

narrow a compliance - based approach towards ethics management. it appears from survey responses carried out in some us companies that the most important factor in controlling unethical conduct within companies is how staff perceive the value that senior management attaches to ethical behaviour. what matters in other words is the general culture of the organisation and the example that is set by those at the top. an important way in which behaviour of staff can be influenced is, for example, through remuneration policy, and senior management needs to be careful to ensure that rewards are not given to staff who uses dubious practices to gain business. this brings me round to the role of the board of directors in banks. as you will recall, we commented in our recent policy response to the banking sector consultancy study on the need for high standards of corporate governance within the banking system as the environment becomes more competitive. we had in mind particularly the need to enhance systems of risk management, and we noted that the primary responsibility for ensuring this rested with the board of directors. we could equally make the same point in relation to the promotion of high ethical standards within banks. the board of directors has an important role to play in establishing the overall culture of an organisation. it is also the ultimate body for resolving the type of complex ethical dilemmas i referred to earlier, and ensuring in particular that the reputation risks in new business strategies or products are carefully addressed. i hope that this conference and my speech, have demonstrated that high ethical standards in banks are neither a luxury nor an abstract ideal. rather, they are a vital aspect of protecting and enhancing the bank ’ s brand image, and ensuring its long - term business survival. behaving ethically is not only the right thing for banks to do, it also makes sound business sense.