not specifically mandated to the deposit bank. for instance, the trading entity is allowed to make loans and loan commitments to its customers. see e. g. matutes and vives ( 2000 ) : “ imperfect competition, risk taking, and regulation in banking ” and boot and ratnovski ( 2012 ) : “ banking and trading ”. see e. g. blinder ( 2010 ) : “ it ’ s broke, let ’ s fix it : rethinking financial regulation ”. bis central bankers ’ speeches the rationale for separation as a regulatory measure can be summarized in the following four points. first, separation is a way of prohibiting banks with insured deposits from engaging in activities whose risks are potentially high and difficult to measure precisely, and which are not essential to deposit banking. second, separation of activities is the most direct instrument for tackling banks ’ complexity and interconnectedness. as banks become simpler in structure, recovery and resolution will be easier. third, simpler structures can make it easier for the management and board to understand and manage and for outsiders to monitor and supervise banking institutions. this can enhance the effectiveness of market discipline and financial supervision. fourth, separating deposit banking and trading entities can also reduce the mixing of the two different management cultures. the separation of activities is complementary to, rather than a substitute for, other areas of bank regulations. the disadvantage of separating banking activities may be that the benefits of scale and scope and diversification of revenue streams are reduced. however, evidence on the economies of scale and scope in banking as well as the benefits from diversification seems to be mixed. most importantly, when separation is allowed to be carried out within the banking group, the banks ’ ability to efficiently provide a wide range of financial services to their customers is maintained. 2. additional separation conditional on the recovery and resolution plan a credible recovery and resolution plan implies that the bank stakeholders bear the costs of a possible bank failure and that there is no significant harm to the real economy, even in a crisis situation when many banks are in trouble at the same time. this would imply that no tax payer money is under threat of being used in a bail out. therefore it is essential to strive for good recovery and resolution plans. a solid plan will also enhance the bank ’ s own risk management and potentially increase transparency of the bank to outsiders. the european commission ’ s plan that banks need to draw up and maintain effective and realistic recovery and resolution plans ( rrp ) is of utmost

part of economics or finance in the universities. but we need solid research foundations upon which to build our models ; hence, this situation needs to change. and we at the central banks must play our part in taking this discipline forward. after all, it is in our own interest to be able to assess the financial stability impact of climate change as well as the climate risks posed on our own balance sheets. we need to lead the way. and leading the way is what this conference has always been about. the systemic risk analytics conference has always taken onboard excellent papers that are innovative in terms of their approach and topic. to continue this tradition, i was delighted to see what we have on the agenda at this year ’ s conference. for what i see in the presentations is a lot of novel thinking and new approaches to analysis. these are the kinds of action we need in order to take things forward, which is a necessity, given the tasks ahead. i hope that the presentations in this conference give you ideas on how to extend your thinking beyond the traditional approaches. and i hope this in turn helps you to develop new approaches that might take your own field of research forward. so, i wish you all a fruitful conference. 2 / 2 bis central bankers'speeches