threat of a financial crisis, where the confidence in the financial system disappear overnight and the whole system freeze. this threat became a reality 10 years ago, and as it evolved it became the worst financial crisis since the the late 1920'es. few of us have personal memories of the 1930'es and the huge, devastating effects of the financial crisis on the real economy, but we all got a clear picture of this era of great depression. during the recent crisis we once again witnessed how a banking crisis evolved and developed into a severe macroeconomic slowdown. for denmark you could say that we ended up losing 7 years of output growth. only in 2014 our level of economic activity was restored to its level prior to the crisis. side 4 af 9 with this fresh memory of the effects of a financial crisis in mind we now work on bolstering our financial system to prevent such crisis to occur again. the crisis revealed a need to shake - up the regulation of credit institutions. and in recent years we have seen a number of international regulatory initiatives which aims at strengthening the resilience of the financial sector and preventing a new financial crisis. looking ahead the question is, whether we have truly learned our lesson well – and what to do next? let me present my vision for the future financial regulation. slide 8 : the pillars of financial regulation our regulatory framework should basically rest on 3 pillars, addressing capital, liquidity and resolution. the first pillar should ensure a solid, true and fair capital adequacy position – based on the actual risk exposure of the bank. second, we need requirements to ensure healthy liquidity management and stable financing, as included in recent basel reforms. last but not least, we need a credible resolution regime. in our european case we need a strict implementation of the eu directive on banking recovery and resolution. this includes setting minimum requirements for own funds and eligible liabilities to be used in the resolution of a bank in troubles. it also includes formulating credible resolution plans for credit institutions. this is all about getting the incentives right. no credit institution should be too big to fail. if we – through the ongoing reforms with the new rules adopted in basel and brussels – end up delivering on all three pillars of regulation, i think we have learned our lesson well after the crisis. and with all these measures in place we will be ready to take a new step : simplify the remaining part of the regulation and ease the administrative burden of banks. basically the three pillar system would leave

external financial markets is also a challenge especially now when global financial markets have tightened, and even disproportionally more for emerging economies as visible through the rising interest rate spread. more broadly, the effectiveness of the resolution framework is influenced not only by its design, but also by the environment within which it operates, including the legal, judiciary system and quality of institutions. needless to say, the scores of emerging economies in these areas do need to significantly improve. to sum up, the fight against inflation is a priority, but we should be mindful that financial stability is also a precondition for price stability. despite the crisis episodes, financial systems have continued to significantly grow, especially in emerging economies, thus playing an increasingly important role for income convergence. and given the new risks on the horizon such as geo - economics fragmentation and climate change, i believe their role will become even more vital. to avoid the risk of financial dominance ( tradeoff between price and financial stability ) in this environment of growing role, but also growing risks in the financial systems, the key way forward is further strengthening of their resilience. as writer, alain de botton said " a good half of the art of living is ( building ) resilience ". i believe this quote quite illustratively explains the central bankers'past, as well as future efforts that are crucial in this uncertain and shock - prone world. thank you, 1 world economic outlook update, july 2023. 2 attinasi, m. - g., boeckelmann, l. and meunier, b. 2023. " the economic costs of supply chain decoupling ", working paper series, no 2839, ecb. 3 schularick, m., steege, l. t., and ward, f. 2021. " leaning against the wind and crisis risk. " american economic review : insights, 3 ( 2 ) : 199 - 214. 4 imf gfsr, april 2023. 5 boissay f., borio c., leonte c., and shim i. 2023. " prudential policy and financial dominance : exploring the link. " bis quarterly review, march 2023. 4 / 4 bis - central bankers'speeches