single european banking supervision set - up. but to a large extent, it is still domestic fiscal and economic policymaking which determines the state of play in the banking system. as a case in point, corporate and personal insolvencies are still regulated very differently across europe. bearing this in mind, if a common deposit guarantee scheme were in place, the repercussions of flawed national policy decisions could be passed through to savers throughout the euro area. and there is another point which needs to be considered. as long as banks continue to carry a large stock of sovereign bonds issued by their home country on their balance sheets, a common deposit guarantee scheme would mutualise the risks of sovereign debt. ultimately, that would introduce eurobonds through the back door. bis central bankers ’ speeches aside from that, the question can be raised as to whether the single resolution board would really be the right institution to operate a european deposit guarantee scheme. and last but not least, regulatory proportionality needs to be maintained as well – would the burden be shared fairly among the large and small banks? 2. banking regulation : nearly all items on the reform agenda ticked off but let ’ s return to the here and now. the first year of european banking supervision went very smoothly. but a functioning banking supervision set - up also needs a sound regulatory footing. from a regulatory perspective, we have now experienced seven years of reform. many of the items on the basel committee ’ s reform agenda have been ticked off. before we cast our minds to future regulatory projects, we should first observe the effect of the new rules – not just each one individually but how they interact with each other. ultimately, though, regulation and supervision are not the only challenges facing banks, nor are they the most pressing ones. let us now consider the risk situation in the german banking sector. 3. the german banking sector : stability improved further... as far as german banks ’ resilience is concerned, we are seeing a gratifying development. german banks have further improved their resilience by raising new equity and retaining earnings. the tier 1 capital ratio of the german banking system as a whole rose by 0. 6 percentage points between june 2014 and june 2015, and currently stands at 15. 6 %. thus, the long - term trend towards strengthening their equity base progressed further in 2015. you will recall that at the beginning of 2008, the year of the global financial crisis, the tier 1 capital ratio averaged around 9.

reason, the banks themselves also have an interest in a functional operational framework. at this point, i would like to explain in greater detail two phenomena that impose limits on regulation : first, the challenges of globalisation and, second, the concept of what is known as homo oeconomicus. globalisation presents us with immense challenges that cannot be overcome at the national or european levels in isolation. global problems such as environmental protection, security, and financial stability require collective solutions and in no way affect just one country or just economic agents alone. furthermore, it is not only economic agents who now face global competition, but also the ground rules applicable in each jurisdiction. a regulatory race to the bottom is often the response 3 / 6 bis central bankers'speeches to this competition between locations. we are indeed trying to contain this through our work in international committees but, as long as there is no global operational framework in place, an ethical vacuum is created here. just because something is legal or not yet subject to global sanctions, it does not ultimately mean that we should also behave that way. legality does not automatically mean legitimacy. the second phenomenon that imposes limits on regulation is the concept of homo oeconomicus, which forms the foundation of most modern economic models. in short, it describes an ideal person who acts purely rationally and therefore makes the most optimal decisions possible. however, business consists of an intricate web of agents who are guided by human decisions. unlike homo oeconomicus, humans are not purely rational beings, so it goes without saying that decisions are often shaped by emotions – and humans are prone to human error. in cases of doubt, ethical vacuums can arise here, too. let me summarise so far. first, business needs values. second, some of the latest tools in banking supervision are moving increasingly in this direction. third, every operational framework has limitations through which ethical vacuums can arise. fourth, we cannot comprehensively entrench values in business through regulations, even if this may be possible theoretically. values must instead be recognised and adopted by each person individually. it is this fourth point that i would like to discuss in more detail. 5 does the answer lie in more supervision? one way of responding to the fact that there are limits to what a rulebook can achieve might be to introduce ever more intricate supervision, so as to cover as many scenarios as possible. ethical vacuums could be plugged with a maximum of rules, each of them as detailed as possible