bust and deep recession. the so - called long - term economic impact study – which like all such studies necessarily employs a range of simplifying assumptions – suggest that a 1 % lowering of the yearly probability of a major financial crisis corresponds to an annual output gain of 0. 6 %. of course, these figures need to taken with a pinch of salt, but they suggest that the order of magnitude is very significant. the same study suggests that, depending on the level of capital requirement, an increase of 1 % in that capital requirement has a significant impact on this probability. from a purely conceptual perspective, there is some validity in the argument that the value of certain of the assets that i mentioned earlier can be questioned in periods of extreme stress, which would suggest their deduction from regulatory capital. but presenting this as an illustration of regulatory capture is wrong, because it ignores the fact that under the achieved consensus there is overall a very significant tightening of the prudential standards. there are two things that are particularly remarkable : first, we have been able to reach an agreement that is truly global. it encompasses not only industrial economies but also emerging economies. as many as 27 countries are part of the ghos, even more than in the g20. second, the end results are tough standards. if we take into account the so - called capital conservation buffer, the required common equity has been increased from 2 % to 7 %, this is by a factor of 3. 5. if i furthermore take into account the previous definition of capital, some institutions could present the level of common equity of only 1 %. for these institutions it is a multiplication by 7 which has been agreed. this is a big step upward. and overall, i consider that our agreement strikes the right balance between the objective of strengthening the resilience of the financial sector and the need to avoid unduly severe implications for national banking systems. they are also global minimum standards and national regulators or supervisors can set tougher standards if they deem that appropriate. the transition arrangements will allow banks to meet the new standards while not endangering the progressive consolidation of the recovery. let me mention a distinctly european note. the new european supervisory system will not only strengthen oversight, it will also foster integration. by developing a single rule book, the european supervisory authorities will contribute to a level playing field in europe. by monitoring and addressing financial stability risks, the european systemic risk board might increase the confidence of market players to engage in cross -

the progress made, and i am pleased that the work continues. in the us also strong orientation has been adopted. we have to understand better the problem of adverse incentives arising from the over - reliance of investors and regulators on external ratings. the crisis revealed that even sophisticated investors and banks, supposed experts in assessing financial risks, too, often took the shortcut of outsourcing their risk - assessments to credit rating agencies. the regulatory endorsement of external ratings, as in the capital framework, played an important role in this failing. on alternative investment vehicles, the g20 has called for greater oversight and in a number of jurisdictions, including the eu and the us, regulatory measures are under discussion. in this domain, too, i would call for a true level playing field at the global level and, in particular, a full convergence of the concept of oversight on both sides of the atlantic. as envisaged in the us and in europe, aside from ensuring proper management of alternative investment vehicles, it is important to ensure appropriate and timely reporting to authorities on investment activities so as to control systemic risk. concluding remarks let me conclude with a few remarks on what i believe is essential to achieve effective reform of financial regulation – and why it is essential to keep the momentum. effective financial reform needs perseverance. achieving reform is complicated ; there are many stakeholders, many legal issues and many international linkages. reform should result in policies that are sound, effective and convergent across countries. thus dialogue and coordination at a global level are essential. effective financial reform also needs strong determination. authorities avoided a collapse of the financial system only because they were able to take decisions with great rapidity and boldness that were not listed in any text books. i will not insist on what the central banks did. it is very well - known. let me remind us that the executive branches and parliaments decided to support the financial sector with a total amount of tax payer risk representing 27 % of gdp – the same percentage on both sides of the atlantic. this gigantic support permitted to avoid a depression. it did not permit to avoid the deepest recession in the advanced economies since wwii. our strong determination to make the financial system much more resilient, and much less fragile, is two - fold. first, we must avoid in the future, as much as possible, the immense cost in terms of long - term economic growth of such a financial crisis. and second, if we had again, by misfortune, to