. today, the country is ruled by law. persons in charge of enterprises, in particular, members of the board and top management of share - holding enterprises shall go through legal procedures and then hold relevant posts. first and foremost, the principle of party ’ s supervision over cadres shall be reflected in proper choice by the party of representatives of state - owned equity. we shall recommend to the board as representatives of state - owned equity those honest and clean party members that have a grasp of the business and those professionals that will carry out in a loyal way the responsibility of representatives of state - owned assets. through their work, we shall implement the party ’ s general and specific policies. second, within financial enterprises, the party organization shall strengthen cultivation and training of party members. they will in turn become persons with high ideals and moral integrity, proficient in professional work and conscientious in carrying out general and specific policies of the party. through the party - wide education to maintain the progressiveness of party members, we shall render party members in financial enterprises to have adequate competitiveness in professional work and charismatic character. by expanding admission of party membership, we shall attract those outstanding talents into the party that accept party constitution so that candidates recommended by the party organization will be accepted by internal departments and staff of the enterprises in election of members of the board and appointment of top management. third, we shall reinforce the party ’ s work of united front within financial enterprises. we shall carry out well publicity to the masses of enterprises, in particular, outstanding personage of democratic parties or without party affiliation, and educate them to conscientiously implement the policies of the government at their posts. we shall bring into full play the supervisory roles of non - party democrats on the work of the party organization as well as enterprises. “ recommendation by the party organization and acceptance by the public ” is a practice for which we have strove as a target for the personnel system since its reform. in other words, it is a system of competing for posts. as such, we can recommend truly outstanding talents to hold relevant posts. and only by doing so can we get over the long - standing bad habits of courting promotion through personal relationships and eradicate corruption in the personnel system. 3. we shall strengthen the reform of the system of hiring financial practitioners, in a bid to ensure that financial enterprises are governed by qualified board and that qualified talents provide financial services to the public. an enterprise is a social entity that weaves various

hermann remsperger : 2007 financial stability review of the deutsche bundesbank speech by professor dr hermann remsperger, member of the executive board of the deutsche bundesbank, frankfurt am main, 29 november 2007. * * * ladies and gentlemen the bundesbank ’ s financial stability review has now become an institution. nevertheless, i probably don ’ t have to give a detailed explanation of why the authors of the 2007 edition, which we completed on 21 november, were faced with particular challenges. this was essentially due to the fact that there is still ongoing uncertainty in the financial system. i shall come back to that in a moment. let me first stress once again, however, that we – like the imf, bis and other central banks – had basically long been expecting a correction of risk premiums, which had been strikingly low for some time. the fact that a deterioration in the macroeconomic setting – specifically, the us mortgage market – might trigger a sweeping reassessment of financial risks was on our radar. not least, two years ago we already pointed out the risks stemming from “ exotic ” types of mortgage loans. however, i don ’ t know anyone bold enough to claim to have accurately predicted the breadth and depth or the ramifications of the current problems. the distortions emanating from the us subprime mortgage market have been placing a strain on the international financial system now for several months in a way that constitutes a challenge for us all. that applies both to the diagnosis and the cure. before my colleague, professor zeitler, goes into detail about the banks, i would like to give you a brief outline of the main thread running through the “ financial markets ” section of the financial stability review. this key idea links ( 1 ) the causes of the financial market turbulence with ( 2 ) the current situation and ( 3 ) the possible lessons that we can draw from the distortions. i transparency has suffered put concisely, in our stability review we conclude that the financial market turbulence is due, not least, to a decline in transparency in the financial system. contributory factors in this have been, first, new financial instruments that are frequently opaque ; second, market players that are new or that have gained in importance and that are often not supervised or hardly supervised at all ; and, third, a new business model in which loans are originated, securitised, and then, finally, sold to investors. above all in