is why the bundesbank did not hesitate in taking part in the eu twinning projects. we carried out our first eu twinning project with the czech national bank back in 2004. since then, the bundesbank has become a strong partner in such eu - funded programmes. we have been involved in projects with central banks and supervisory authorities in 14 countries so far. in particular, we have been able to contribute quite specific insights, which we gained from our own transformation processes, including german reunification and european monetary union. against this backdrop, we were more than happy to participate in the eu twinning project for the 1 / 3 bis central bankers'speeches national bank of serbia. this was facilitated by the fact that the national bank of serbia and escb central banks have cooperated closely for quite some time now. starting in 2008, the national bank of serbia has been involved in a range of eu - funded escb programmes. in addition, there has been a close bilateral cooperation between the national bank of serbia and the bundesbank. for instance, we carry out up to ten bilateral activities on central banking and supervisory topics each year. and participants from the national bank of serbia regularly attend the bundesbank ’ s international central banking courses. 3 eu twinning project for the national bank of serbia ladies and gentlemen, in as early as 2003, the european council summit in thessaloniki made integration of the western balkans a priority of eu expansion. in 2009, serbia officially submitted its application for membership of the eu. accession negotiations finally began in 2014. since then, work has been ongoing in a wide range of economic and political areas in order to move serbia closer to the eu. admittedly, our twinning project has been just one small building block in this extensive integration process. but, it has undoubtedly been an important one! our project ’ s primary goal has been to improve work practices at the national bank of serbia and to align them with the practices of the european system of central banks. today, all i can say is : “ mission accomplished! ” from the outset, our project has been a perfect example of sharing experiences and learning from one another. in particular, the formation of our consortium proved to be very fruitful. the consortium partners complemented each other very well. as a result, we were able to cover a wide range of topics. our croatian colleagues took on the project components like data coverage, international relations, insurance and pension fund supervision and liberalisation of capital movements. our romanian

entire financial system? are individual market participants very large – that is to say, too big to fail – or too closely interlinked with other market actors, meaning they are too connected to fail. second, can many smaller market participants collectively engender systemic risk given that they are exposed to similar risks – are they too many to fail? for instance, a sharp hike in interest rates could weigh on multiple credit institutions at the same time. the objective of macroprudential oversight and regulation is to identify and contain such risks and misguided incentives. this can only be achieved by ensuring sufficient resilience in the financial system as a whole. bis central bankers ’ speeches 2. key statements of the financial stability review 2015 against this backdrop, allow me to summarise the current situation in the german financial sector by outlining the key statements made in our report. 1. low interest rates pose risks to financial stability as they squeeze banks ’ and insurers ’ earnings. institutions could then assume greater risks without having sufficient capital buffers to be able to cushion the impact of these risks. 2. dangers are also associated with an abrupt sharp hike in interest rates. banks that, for instance, had granted long - term, low - yielding loans would then have higher funding costs. 3. the business volume in germany ’ s shadow banking sector has grown. we see no evidence of heightened risks at this time, however. 4. macroprudential instruments are gradually being put in place. these instruments are intended to curb scale effects and procyclical effects. instruments that can be employed to mitigate risks arising from mortgage lending are under development. 5. the european capital markets union will be an important complement to the banking union. better developed and integrated equity markets, in particular, could play a role in improving the way in which risks are shared. 3. low interest rates and financial stability the current low interest rates are a global phenomenon. they reflect the low real economic growth and expansionary monetary policy stance observed around the world. consequently, attention is currently focused on monetary policy decisions and their impact on interest rates. however, an expansionary monetary policy can also cause significant risks to financial stability to build up. empirical studies have shown that monetary policy has an impact on the price of shares, bonds and real estate. the longer interest rates stay low, the more incentive market participants have to take greater risks. however, it can end up being a problem if misguided incentives cause risk