andreas dombret : can regulation contribute towards greater stability of the financial system? speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the general conference to mark the 60th anniversary of the osterreichische bankwissenschaftliche gesellschaft, vienna, 1 october 2012. * * * ladies and gentlemen, “ can regulation contribute towards greater stability of the financial system? ” my answer to this question is, “ yes, but …. ” or to be more precise : “ yes, but only if we pay more attention to certain things in future. ” what do i mean by that? i would like to begin by emphasising the great achievements that we have reached so far. the international financial system is considerably more resistant today than it was just a few years ago. many important regulatory measures were tackled under the g20 financial sector reform agenda. many initiatives have been converted into legislation or have already entered into force ; others will follow in the months ahead. now i come to the “ but ” i just mentioned. in order to make the financial system truly safer, i believe we must pay more attention to the following two aspects in the future than we did up to now. first, we must have a closer look at the consistency of the many different regulatory projects. second, we need to intensify international cooperation. let me speak briefly about these two aspects 1 ) pay greater attention to the consistency of regulation we are currently working on a number of topics to make the international financial system more stable. of course, the progress made so far varies from one area to the next. at this point i would like to mention just three examples that keep us busy at the moment : • the transposition of capital requirements laid down in basel iii into european law ( crd iv / crr ), • the new solvency regime for the european insurance sector ( solvency ii ) and • the eu european market infrastructure regulation ( emir ). this small selection is enough to demonstrate the wide range of reforms that have been launched – from banks to insurers to individual financial instruments. this is both right and necessary. however there is a danger that we may lose overview of the financial system as a whole by pushing ahead with sector - specific regulations largely independently of one another. we need to be aware of this risk and focus our attention more on the systemic aspects of regulation. it is important to adopt such an approach in order, for example, to effectively

working long hours are common ; in my view, there is still considerable room to enhance work efficiency through such initiatives. the second is women's participation in the economy. in japan, the labor force participation rate of women in the working - age population has reached 70 percent, which is considered a high level on a global standard. i expect that this trend will encourage firms to assign more women to value - added work and promote them to managerial positions from now on. the third is employment of seniors. although their employment has been progressing, there remains considerable room for improvement, as there are gaps between what they can accomplish through their ability and will, and what they actually are assigned to do. the fourth is employment of foreigners. although their employment has been increasing gradually, it is still vital to further develop systems to accept them. lastly, the fifth example is labor - saving efforts through utilization of information technology including the use of robots. japan is a leading country in robotics, and i believe that we should expand its application from manufacturing operations to other kinds of work, including administrative work. as these initiatives toward structural reforms and a growth strategy bring about benefits including improvement in business efficiency, they may exert downward pressure on wage increases in the short term, but in the longer term, they will raise the productivity of the economy as a whole, thereby strengthening its growth potential. i believe that improving productivity would stimulate price rises through increases in wages and private consumption. nevertheless, even now there are firms that maintain their cautious wage - and price - setting stance, as they are concerned, for example, about a shrinking of the domestic market size and the issue of succession for businesses ; they also lack confidence in growth in private consumption. let me note that raising productivity and growth potential is a time - consuming task. therefore, while the bank's conduct of monetary policy stimulates aggregate demand and suitably tight supply - demand conditions are being maintained, a virtuous cycle in which active demand encourages progress in various initiatives should remain intact for a long period of time. i believe that, with a view to achieving its price stability target and realizing sustainable economic growth in a coordinated manner, the bank should continue with its monetary easing policy and firmly support the various initiatives taken by a wide range of entities.