cover every single risk in the complex world of banking, the regulation, too, had to become more complex – and that is still taking a very heavy toll on smaller institutions ; too much so, if you ask me. for small institutions, especially, the work this entails is disproportionately time - consuming and costly. at the same time, many a provision grasps at thin air at small institutions. just take the existing disclosure requirements, which are there to ensure that large publicly traded institutions are subject to public accountability. yet market discipline hardly has any bearing for small institutions which are not publicly traded – so why force them to satisfy the same provisions? another point worth mentioning in this regard is that the many smaller institutions represent an important component of a diverse banking landscape. during the financial crisis, it was notably the savings bank and cooperative bank sector which proved to be an anchor of stability in germany. savings banks and cooperative banks, operating as they do within their own regions, were far less exposed to international disruptions. plus, close relationships built up over time with customers exuded stability in an environment fraught with uncertainty – clearly, the diversity of germany ’ s banking landscape paid off on this score. if you ask me, that alone is reason enough to systemically scour the existing rulebook for provisions that ask too much of smaller institutions and to then set about eliminating them. in europe, the rulebook is presently being subjected to a thorough and comprehensive review, and the european commission has already tabled quite a few proposals for amending the rules. some of these proposals would bring relief for smaller institutions. these are proposals i advocate in principle. adjustments could be made to the magnitude and frequency of disclosure and reporting 2 / 5 bis central bankers'speeches requirements. the standards for remuneration systems are another area that could be addressed, while sensible exceptions might be made to the new standardised approach for market risk. while i have a great deal of time for the legitimate interests of smaller institutions rooted in their home regions, there ’ s one issue i would like to stress : proportionality isn ’ t a gateway to relieving smaller institutions of regulation altogether. it should most certainly not be about lowering quantitative requirements – for capital or liquidity, for instance – but rather a case of tracking down operational requirements that can be dispensed with. the diversity of a banking system cannot be protected by classifying small banks and savings banks as completely risk - free. trouble can

in moderating demand to better align with supply. we are committed to doing that job. the second lesson is that the public's expectations about future inflation can play an important role in setting the path of inflation over time. today, by many measures, longer - term inflation expectations appear to remain well anchored. that is broadly true of surveys of households, businesses, and forecasters, and of market - based measures as well. but that is not grounds for complacency, with inflation having run well above our goal for some time. if the public expects that inflation will remain low and stable over time, then, absent major shocks, it likely will. unfortunately, the same is true of expectations of high and volatile inflation. during the 1970s, as inflation climbed, the anticipation of high inflation became entrenched in the economic decisionmaking of households and businesses. the more inflation rose, the more people came to expect it to remain high, and they built that belief into wage and pricing decisions. as former chairman paul volcker put it at the height of the great inflation in 1979, " inflation feeds in part on itself, so part of the job of returning to a more stable and more productive economy must be to break the grip of inflationary expectations. " 2 one useful insight into how actual inflation may affect expectations about its future path is based in the concept of " rational inattention. " 3 when inflation is persistently high, households and businesses must pay close attention and incorporate inflation into their economic decisions. when inflation is low and stable, they are freer to focus their attention elsewhere. former chairman alan greenspan put it this way : " for all practical purposes, price stability means that expected changes in the average price level are small enough and gradual enough that they do not materially enter business and household financial decisions. " 4 of course, inflation has just about everyone's attention right now, which highlights a particular risk today : the longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched. that brings me to the third lesson, which is that we must keep at it until the job is done. history shows that the employment costs of bringing down inflation are likely to increase with delay, as high inflation becomes more entrenched in wage and price setting. the successful volcker disinflation in the early 1980s followed multiple failed attempts to lower inflation over the previous 15 years. a lengthy period of very restrictive