economy. second, we all know also that any regulation may have unintended consequences. one of those, of course, is to create incentives for regulatory arbitrage. it is therefore crucial that the reforms be applied fully and consistently across jurisdictions. it is also important to make sure that a significant part of financial intermediation does not shift to the unregulated ( shadow ) financing sector, as this would not help reduce the likelihood of disruptive financial crises. finally, increasing robustness is a necessary but not sufficient condition to get safer financial systems. another important element is to ensure that risk remains at acceptable levels and carefully managed. this is, so to speak, one specificity of our approach in this country. we believe in strong and efficient supervision. we don ’ t think that bigger cushions are a substitute for competent supervisors. we are strong supporters, in our jargon, of the “ pillar 2 ” approach, whereby the supervisor is in charge, at any single moment, to check the adequacy of capital buffers with the effective level of risk in the system. needless to say, we also strongly support the development of macro prudential tools allowing authorities to detect and prevent systemic risks. given that all economic cycles are not simultaneous, to be fully efficient, those tools should be set and implemented at each jurisdiction ’ s level and not a regional one, in order to take into account national cycles and the level of risks of individual economies. overall, i can assure you we are very keen to monitor in real time the economic impact of financial regulation. for the first time, economic and systemic assessments have been made of the new projected basel 3 framework. we will continue to update them permanently. a good example of our constant vigilance relates to projected liquidity ratios, where the systemic impact and implications for monetary policies are being thoroughly reviewed at this time. * * * to conclude, let me emphasize that policy makers are fully aware of possible macro consequences of regulatory reforms and will be eager to limit the economic costs. beyond broad effects on growth, it is also clear that the new regulations should neither derail financial systems nor favor some particular business models over others. bis central bankers ’ speeches yet, there was, and still is, a need to move from a financial world of excessive risk taking and heavy regulatory arbitrage to a new system of better quality capital and increased risk capture. an implementation of the basel iii package endorsed by the g20 will provide the

with stable stores of value. one very promising avenue would be, for countries which have surplus savings, to develop their own internal stores of value by expanding the range of safe and liquid financial assets available to domestic and international investors. by doing so, they would achieve several goals at the same time. they would bring more efficiency in the financing of their own domestic needs. they would provide their own investors with a broader range of choices. they would also eliminate some of the currently existing incentives to export capital in order to protect its value. they would contribute to reduce the “ asset shortage ” with all its negative consequences, including international imbalances and the financing of asset bubbles. financial development in many countries would address both the causes of international imbalances and some of the roots of the financial crisis. references adrian, t. and h. s. shin ( 2008 ), “ liquidity and leverage ”, federal reserve bank of new york staff report no 328. aizenman, j., y. jinjarak and d. park ( 2010 ), “ reserves and swap lines : substitutes or complements? ”, nber working paper no 15804 march. backus, d., henriksen, e., lambert, f. and c. telmer ( 2009 ), “ current account fact and fiction ”, nber working paper, 15255, november. baclet, a. and vidon e. ( 2008 ), “ the world distribution of external imbalances : revisiting the stylised facts ”, banque de france occasional paper, 6, june. bernanke, b. ( 2005 ), “ the global saving glut and the u. s. current account deficit ”, remarks at the sandridge lecture, 19 march. blanchard o., milesi - ferretti g. m. ( 2009 ), “ global imbalances : in mid - stream? ” imf staff position note. blanchard, o., f. giavazzi and f. sa ( 2005 ), “ the u. s. current account and the dollar ”, mit department of economics working paper, no 05 – 02 and nber working paper no 11137, february. bracke, t., m. bussiere, m. fidora and r. straub ( 2008 ), “ a framework for assessing global imbalances ”, ecb occasional paper no. 78, january 2008. bussier