jens weidmann : macroprudential policy through the lens of sherlock holmes welcome address by dr jens weidmann, president of the deutsche bundesbank and chairman of the board of directors of the bank for international settlements, at the 5th annual macroprudential conference, eltville, 21 june 2016. * * * 1 introduction ladies and gentlemen, every contact leaves a trace. that is a basic principle of forensic science. in the early decades of the 20th century, it was established by the pioneering french criminologist edmond locard, and thus became known as locard ’ s exchange principle. but locard ’ s approach itself may have been affected by an exchange – he developed his methods after having come into contact with detective fiction. 1 years before locard set up his forensic laboratory in 1910, a fictional character had declared in a popular story : “ as long as the criminal remains upon two legs so long must there be some indentation, some abrasion, some trifling displacement which can be detected by the scientific researcher. ” 2 you all know this fictional investigator – it was none other than sherlock holmes. when arthur conan doyle published his first stories about the consulting detective in victorian times, criminal investigations usually started out from testimonies and motives. physical evidence was sought after theories had been built. and detectives were still lacking or renouncing fundamental forensic tools. it was only in 1901 that the british police adopted fingerprinting, for example. sherlock holmes ’ method of deduction, to reach conclusions based on observed facts, helped him to unravel mysteries virtually from the comfort of his armchair. but the master detective also had to go to crime scenes to search for tiny traces with his magnifying glass and collect the data he needed. the analysis of risks to financial stability can resemble piecing together strands of evidence in a criminal case. indeed, richard barwell, the head of macro research at bnp paribas asset management, once referred to the principle of evidence - based macroprudential policy as the “ sherlock holmes approach ”. 3 2 macroprudential policy measures in germany take germany ’ s intention to activate the countercyclical capital buffer, for instance. on 27 may, germany ’ s financial stability committee issued a recommendation to activate a countercyclical capital buffer of 0. 25 %. the step was based on thorough detective work by the bundesbank. in last year ’ s financial stability review we presented

other. it is also easy to lose reputation although more difficult to acquire it. therefore i will appeal to the faculty as well as students of this august university not to become complacent but remain on their toes. they should continually try to excel in their respective fields, maintain high standards and traditions of knowledge seeking and discourage the bad habits of memorizing the material, cheating at the exams, skipping the classes, selecting only the material which is likely to appear at the exam. those of you who devote themselves to continuous and inquisitive learning will come ahead in life. no amount of sifarish or nepotism or connections with the right people will help you in the long run. it is only the innate qualities of hard work and systematic learning which will keep you in good stead. i wish all those who are graduating today the best of luck in their careers.