burkhard balz : closing words third deutsche bundesbank / european central bank / federal reserve bank of chicago conference on ccp risk management closing words by mr burkhard balz, member of the executive board of the deutsche bundesbank, at the third deutsche bundesbank – european central bank – federal reserve bank of chicago conference on ccp risk management, virtual event, 3 march 2021. * * * 1 introduction ladies and gentlemen, on behalf of the deutsche bundesbank, the european central bank and the federal reserve bank of chicago, i would like to thank you for participating in the third joint conference on ccp risk management. “ don ’ t cry because it ’ s over. smile because it happened, ” quoting author dr. seuss. a very interesting conference day with fruitful debates and intense discussions on current and future challenges in ccp risk management is coming to an end. i now have the honour of concluding today ’ s conference. 2 how to learn from the current crisis and manage future challenges in such dynamic times, i think it is important to pause briefly and take a moment to look back and reflect. much has changed since last year ’ s conference. in past years, many participants had to travel long distances to attend the ccp conference in frankfurt ; today it only took a mouse click to get in. i am quite sure that these new opportunities will survive beyond the current crisis. the coronavirus outbreak hit us unexpectedly and quickly evolved from a local problem into a global crisis. for almost a year now, the pandemic has had a firm grip on all our lives. in the meantime, we have got used to the new “ normal ” : social distancing, wearing masks and – of course – working from home. our conference today has also taken place virtually and despite everything, the event has gone smoothly and enabled a lively exchange. covid - 19 is merely the most recent challenge. but, not to forget, on the top of that there have been multiple issues within the last decade. the consequences of the financial crisis of 2008 – 09, dramatic climate change and geopolitical developments, notably brexit, are also having a profound impact on our industry. moreover, it has become abundantly clear that it is important to work jointly on future issues and to prepare adequately. with this in mind, please allow me to briefly walk you through today ’ s topics and some key takeaways that deserve further consideration and elaboration

close cooperation with the bis. the european systemic risk board and the asian + 3 macroeconomic research office with a chinese official as a first head of this office will play a significant role on the regional level. and of course, the national monitoring and assessment of risks by the people ’ s bank of china and the deutsche bundesbank in their own countries remain the first and most important pool of information on financial stability. this broad variety of institutions in evaluating financial stability raises the question, whether and to what extent there is a necessity for international cooperation in the communication of these assessments. two different aspects have to be balanced in future discussions : conflicting views and comments could confuse markets more than contribute to its bis central bankers ’ speeches stabilization. on the other hand, it is important to guarantee independent analysis and communication in financial stability. the second challenge i would like to highlight, is the unexpected strength of spillovers into the real economy around the globe. nearly all international financial institutions and national research institutes underestimated the dampening effects of the financial crisis on the real economy. i support all efforts which are focused on a better capturing of financial structural changes in macroeconomic models. some commentators are rightly pointing to the fact that textbooks and models are lagging behind reality. but it appears that the distance has become too large. moreover, in further developing macro - stress tests we currently need to incorporate these financial changes. only some years ago, macro - stress tests were pre - dominantly focused on real shocks and its impacts on the stability of the banking system, while now most shocks have been stemming from the financial sector. my third brief remark is focused on the unexpected and high vulnerability of countries. this has been also true for those countries with a stable and sound macroeconomic framework. if macrostability is an important necessary condition, but not sufficient to weather the initial financial shock, what then should be the appropriate response to this experience? how could we enhance the protection against these shocks? this is still a quite open question. in my view, we should put our focus more on effective prevention than on building safety nets, which is more an element of crisis management than of prevention and could enhance excessive risk taking and moral hazard. the more the risks of individual decisions in the financial sector are backed by the state or global safety nets, the higher is the probability of a misallocation of financial resources by individual investors. we need just the opposite, a greater sensitivity of the individual manager to financial risks, to bring financial