financial and economic history. therefore, one might be tempted to classify 2012 as an “ annus horribilis ”. i wish to challenge this view. will 2012, with hindsight, possibly go down in history as an “ annus mirabilis ”? absurd, you may think. but on second thought this notion seems less absurd than it first appears. let us not forget that the famous poem of john dryden entitled “ annus mirabilis ” was inspired from major events in the year 1666. a very difficult year, to put it mildly, a year in which the great fire destroyed 80 % of the city of london. the fire spread so rapidly due to the city ’ s narrow streets and the “ interconnectedness ” of houses. the battle to stop the fire was considered to have been won by two factors : the strong east winds died down, and the tower of london garrison used gunpowder to create effective firebreaks to stop the fire from spreading further eastwards. dryden ’ s view was that god had performed miracles for england. the king promised to improve the streets. bis central bankers ’ speeches well, some may say, so it is in 2012. the fire in the financial markets was stopped by the ecb, by the two firewalls efsf and esm as well as by the governments announcing that they would improve the financial system. thus 2012 is an “ annus mirabilis ”. but as you know, miracles need to be acknowledged either by the pope or by the scientific community. so let us check whether a miracle was at work in 1666. and what i am going to say now about 1666 can be understood as a metaphorical warning about what could happen if we do not draw the right policy conclusion from the events of 2012. despite numerous radical proposals, london was rebuilt using essentially the same street plan which was in use before the fire. so the miracle is that nothing similar to the great fire has happened in the following years. the lesson of this story is quite clear. the financial system needs better rules than in the years preceding the crisis. we need a resilient financial system. we need a strong supervision. we need effective macroprudential instruments. we need to know how these instruments will work, which is a challenge for the scientific community as well as for macroprudential policy makers. otherwise, we would be putting our trust in a miracle. and we need to understand the complicated interactions between the financial and the real economy

andreas dombret : challenges for financial stability – policy and academic aspects dinner speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the joint conference of the deutsche bundesbank, the technical university dresden and the journal of financial stability, dresden, 17 january 2013. * * * 2012 : an “ annus horribilis ” or an “ annus mirabilis ” or neither? your magnificence professor muller - steinhagen, mister state minister doctor beermann, ladies and gentlemen : the turn of the year gives me the chance to relate my discussion of some of the future challenges for financial stability to a resume of the previous year. please allow me to do this from a european perspective and let me start with a seemingly innocent question : will 2012 go down in history as an “ annus horribilis ” or rather as an “ annus mirabilis ”, or neither? the answer to this question is less trivial than it appears at first. let ’ s look to the origins of the words “ annus horribilis ” and “ annus mirabilis ”. to see this please note that the originator of the “ annus horribilis ”, queen elizabeth, used it to describe her feelings about the year 1992. at the time, her majesty was talking about, among others, the fire at windsor castle, but one might also read it as a comment about what happened in the financial sector in 1992 when the markets forced the uk to leave the european exchange rate mechanism. more recently, the queen ’ s remarks sound as a comment about the financial and economic development of 2012. please also note that many people use the metaphor of a large - scale fire to explain the economic term of a “ systemic ” event. thus her majesty is worth quoting in more length : “ 1992 is not a year on which i shall look with undiluted pleasure. in the words of one of my more sympathetic commentators it has turned to be an ‘ annus horribilis ’. i suspect that i am not alone in thinking it so. indeed i suspect that there are very few people or institutions unaffected by the last months of worldwide turmoil and uncertainty. ” according to various measures 2012 was a year of considerable systemic tensions. indeed, the indicators were approaching – but did not quite reach – the sad levels seen in the second half of 2008 and in the first half of 2009 – which was without doubts a very difficult period in the