. the need for improved risk measurement and management practices with regard to the main risks institutions are exposed to ( e. g. credit, liquidity and market risks ) has also been recognised in a number of industry studies that have identified areas in need of improvement 6. supervisory authorities have issued guidelines on required improvements in corporate governance and risk management ( in areas such as liquidity and stress testing ) and have also issued supplemental guidance under pillar 2 ( the supervisory review process ) of basel ii that addresses the flaws in risk management practices revealed by the crisis. although progress has been made in improving internal risk management systems, considerable work must yet be done. 7 the industry has published reports highlighting the need for improved risk measurement and management, including the provision of information to and involvement of senior management with regard to the risk profile of the institution. see for example publications by the institute of international finance : reform in the financial services industry : strengthening practices for a more stable system ( dec. 2009 ), principles of conduct and best practice recommendations, financial services industry response to the market turmoil of 2007 – 2008 ( jul. 2008 ), report by the counterparty risk management policy group entitled containing systemic risk : the road to reform ( aug. 2008 ). conclusion reached in a recent report by the senior supervisors group entitled, observations on developments in risk appetite frameworks and it infrastructure, december 23, 2010. bis central bankers ’ speeches looking forward, the re - shaped banking strategies need to reflect a better balance between risk and returns. an important challenge for the eu banking sectors in the next few years will be to find the optimal level of return that preserves long - run profitability, without incurring in unknown risks. iii. 4 central banks and the new macro - prudential supervisory framework let me conclude my speech by providing a brief reference to the new macro - prudential supervisory framework in europe. the financial crisis has provided a vivid illustration of the importance of having in place an effective framework of macro - prudential surveillance that can complement micro - prudential supervision both at the national level and in a cross - border context. thus, in order to enhance their abilities to assess and address potential systemic risks, over the past few years significant work has been undertaken by authorities at country, regional and global levels with the aim of setting up a macro - prudential policy framework. in this respect, a major achievement at the european level has been the establishment of the european systemic risk board ( esrb ),

bankers ’ speeches the mro rate will become more relevant again in the future, signalling our monetary policy stance. this implies that the overnight rate will be close to the mro rate. we already see that interbank markets are performing better, as shown for instance by the decreasing dependency of banks on ecb refinancing operations. recourse to these operations has declined significantly from close to €900 billion in june 2010 to around €430 billion today. 5. monetary policy and heterogeneity in public debates, viability of the euro has again been questioned on the ground that the financial crisis has deepened the economic divide across member states. but the ecb ’ s bis central bankers ’ speeches monetary policy continues to be geared towards price stability in the euro area as a whole. the single monetary policy of the ecb cannot address different economic growth or inflation across regions of the euro area. such macroeconomic heterogeneity is a normal feature within a monetary union. heterogeneity can even be a desirable feature when it reflects the necessary adjustments to macroeconomic imbalances that have built up. macroeconomic diversity is an issue that national policy - makers should deal with, not the ecb. their primary contribution of course would be to avoid building up unsustainable macroeconomic imbalances. indeed, the bulk of the current imbalances in some euro area countries reflect that countries have insufficiently internalised the participation in a monetary union into domestic policies. to fully realise the benefits of emu requires national policies to adapt to emu. this applies to the areas of fiscal policy ( including taxation ), structural reforms, regulation and banking supervision. without this, imbalances will inevitably reoccur, challenging the proper functioning of emu and thus of monetary policy. it is essential to put in place a european framework that is incentive - compatible and credibly enforceable, to avoid the re - emergence of significant imbalances. national policies should be fully guided by the framework. does this then imply that monetary policy completely ignores developments in individual euro area countries of the euro area? no, but specific national developments play a role for monetary policy only to the extent that they have an impact on the medium - term outlook and risks for price stability in the euro area as a whole. maintaining price stability for the entire euro area is the central contribution the ecb ’ s monetary policy makes with a view to supporting sustainable economic growth, job