can clash with the goal of creating a stable financial system. after all, it was the large institutions in particular which played the tragic leading role in the crisis about ten years ago. gradual harmonisation of the financial sector would not be in the customer's interests either. the german banking and savings bank sector in particular is characterised by its great diversity and its close customer proximity. last but not least, excessive burdens in smaller institutions contradict the idea of a level playing field, in other words, ensuring that competitive conditions are the same for all banks and savings banks. with regard to the creation of fair competitive conditions, rules which excessively burden certain institutions are simply wrong. 4 we can manage with less that is why i believe regulation must be made more proportional. many of you are aware that i have felt strongly about this for a quite some time, so i am pleased that we have made solid progress in the meantime. in this vein, the european commission put forward a proposal last november concerning how the capital requirements regulation, or crr, and other european rulebooks such as the capital requirements directive, or crd, are to be revised. some of its suggestions relate to proportionality. the commission's suggestions are a good start. naturally, some points need further discussion. however, i am confident that we will be able to make meaningful minor improvements. i use the term " minor improvements " because the amendment of a few rules is unlikely to solve the problem of excessive burdens among smaller banks. this is why i support a more basic approach : the creation of separate regulatory frameworks for smaller institutions on the one hand and for large multinational institutions on the other. this approach is often referred to as the small banking box. this would not necessarily make a completely new rulebook essential, although it might sound that way at first. a single short section in the crr would suffice. but how might the box look in concrete terms? i would like to outline its basic features for you, focusing on two essential characteristics in particular : firstly, defining the parties which could be subject to a simplified rulebook, and secondly, the areas in which i believe it would be feasible to ease the burden. let's start with the definition. i've talked about a set of rules for small institutions. an initial criterion for deciding whether a bank or savings bank comes under simplified rules would therefore be comparatively small total assets. a sensible limit beneath which an institution could use simpler rules would be

the one where there are no rules, explicit or implicit. this is a rare situation and feasible only in narrow businesses where the sector imposes no or minimal externalities on the broader system. in the absence of rules, however, industries do not always act in broader public interest and their behaviour often tends to favour the powerful at the cost of equity, fairness, and overall social development. as a sector grows, some form of rules become necessary and are often agreed upon by the players themselves, primarily in a bid to impose selfdiscipline among the members. an industry which operates only under self - regulation, however, may not also always act in public interest. these concerns assume greater importance as a sector / industry develops and starts to become systemically important. here a role for an external, neutral body which performs the role of an umpire becomes necessary. such an umpire in a business sector is typically a public or statutory authority in the form of a regulator or the government which sets the rules for an industry. the fourth category is one where self - regulation and state - imposed regulation co - exist with the regulator or state institution explicitly or implicitly recognizing the sro. the co - existence of a regulator and a sro is, in fact, the most common framework or structure prevalent across the world in financial sector. sros – roles and responsibilities 11. the roles of sros vary across jurisdictions, markets, and sectors that they function in. typically, in the financial sector, the broad objectives of sros reflect those of the financial sector regulator, viz., preservation of market and financial integrity and protection of customers / investors. within these broad objectives, sros typically work towards establishing minimum benchmarks as well as ethical and behavioural standards. with the guidance received from the regulator, they help instill professional market conduct amongst their members in order to ensure customer / investor protection. sros often get involved in the documentation of operational guidelines that set out the rules of conduct and prescribe market conventions, standard procedures and documentation, master agreements, etc., to be followed by market participants. in some jurisdictions, they monitor adherence to codes of conduct and regulations issued by the regulator and are also empowered to take appropriate action in case of violations. sros also establish dispute resolution frameworks to facilitate early resolution of disputes. in their developmental role, sros serve as the representative of their members in various fora including in interactions with the regulator. an integral part of sro functioning is to imp