##justment, by contrast, may cause a credit crunch, a surge in private savings and therefore a collapse in consumption. in the course of the crisis, many of these effects along with a serious economic downturn could be observed in most industrialised countries. moreover, global trade declined dramatically when the financial crisis spread to the real economy, a development which also hit the previously fairly unaffected emerging market economies. overall, the extent and the depth of the recent crisis have raised awareness that the ongoing global integration of financial markets and economic activities increases the vulnerability of the whole system despite the unquestionable positive effects with which it is associated. with the stabilisation of the markets and the incipient recovery, the focus has therefore shifted from managing the current crisis to preventing future crises. given the international dimension of the crisis, this process is rightly taking place at the international level. in the following, i would like to outline the main elements of the reform process initiated by the g20 in order to create a more stable financial system. 3. elements of the regulatory reform process a cornerstone of the attempt to create a more stable financial system is the reform of banking regulation. thereby we should begin with the individual bank? that is, on the microprudential level of regulation. the relevant regulatory framework on this level are the basel ii rules, which have been implemented by a large number of countries. as the crisis revealed some shortcomings of the basel ii framework, the g20 commissioned the financial stability board and the basel committee on banking supervision to work towards a reform of the current rules. a first set of relevant measures was published in the summer of 2009 as a direct reaction to the subprime crisis. among others, these measures include stricter capital requirements for market risk and securitisation as well as heightened risk management requirements. additional proposals were put forward in december 2009. aiming at enhancing the resilience of the banking sector, these proposals include a new liquidity standard as well as a revised definition of capital, which should increase its quality, consistency and transparency. apart from that, the introduction of countercyclical capital buffers should help to mitigate procyclicality. furthermore, the introduction of a leverage ratio is planned to alleviate a problem which is addressed in another paper presented at this conference. tille and his co - authors highlight the danger which highly leveraged institutions present for financial and macroeconomic stability in their paper “ rational risk panics ”. throughout

highly complex, and the right calibration is very important. therefore, economic research plays a crucial role in ensuring the success of the initiated reforms. this is particularly true of the design of procyclical capital buffers and surcharges for systemically important financial institutions. but of course there are many other very interesting strands of research, some of which have been covered at this conference. quite a few papers aim, for example, to create a deeper understanding of systemic risk and contagion mechanisms, which are surely key issues when it comes to dealing with future crises. in their paper “ structural estimation of systemic risk : measuring contagion in the sub - prime crisis ”, rigobon and his co - authors have developed a measure of international contagion which allows us to assess the role of systemic risk for the global economy. 4. conclusion ladies and gentlemen addressing the broader context of global developments which have contributed to the financial crisis and in particular the role which global imbalances have played, you have dealt with an interesting but also very complex issue at this conference. this question is far from being resolved, and i am sure that it will occupy researchers for quite some time to come. that is not less the case for those strands of research that deal with how to strengthen the financial system. seen in this light, times have seldom been as exciting for economic research as they are right now. i would like to encourage you to continue with your work and wish you much success. thank you for your attention.