capital requirements need longer time series. less than one year after the introduction of basel ii in germany, the database is still very narrow. it is not yet possible to make a detailed assessment of whether the minimum capital requirements are becoming binding and therefore acting in a procyclical manner. knee - jerk responses, such as the general introduction of additional general capital buffers by means of pillar 2 are therefore, as we see it, not appropriate. what is, in fact, called for is a close monitoring of developments and a careful analysis of the incoming data. it is important, first of all, to gain a deeper understanding of the complex mechanisms of banks ’ capital management and of basel ii ’ s impact over an adequate period of time. the banking supervisors are working very hard on this. their findings, as well as others, can then be used to assess any systemic effects of the prudential requirements. if procyclical effects exist on a significant scale, they should then be taken into account in a system - oriented supervisory approach. now, i have already indicated that the fundamental issues concerning procyclicality also have to do with accounting. fair value accounting leads to valuations fluctuating along with market prices. this evidently heightened the financial market turbulence. with a mark - tomarket valuation of the paper, losses result in falling asset values, making the reduction of risk positions seem advisable, thus triggering a further wave of selling. computer - controlled procedures for automatically limiting losses can give further impetus to this procyclicality. conversely, rising asset values in an upswing make additional investment possible, which can drive market prices up even further. nevertheless, by means of “ prudential filters ” the banking supervisors have ensured that these fluctuations in the balance sheet items do not impact fully on the regulatory capital. this means that the nexus of falling market prices for assets, declining own funds and restricted ability to lend in a downswing is dampened. in an upswing the reverse applies. this prudential correction mechanism therefore limits only part of the effects of fair - valuebased accounting, namely its impact on the potential supply of credit. iv conclusion ladies and gentlemen in conclusion, let me return once more to the beginning. after well over a year of financial market turbulence and following the experience of the past few days, i firmly believe that stabilising the financial system cannot consist solely in working through “ to do ” lists with their recommendations for action, however

this statutory deposit protection at the minimum european level, there exist additional, private protection schemes operated by the various categories of banks. not least in the wake of the bank run on northern rock last summer, the european commission is considering a revision of the deposit protection directive. it is aiming for a greater degree of harmonisation. in particular, this concerns a higher level of minimum protection and the abolition of the co - insurance. as the discussion in the eu now stands, this would mean that the principle of subsidiarity would be basically retained. we at the bundesbank attach great importance to this. deposit protection has to be consistent with the specific features of the national banking systems. ii fundamental institutional questions with the distribution of powers among the sovereign regulatory levels, i am now very close to the second set of fundamental issues. i would now like to talk about a number of fundamental institutional questions about the stabilisation of the financial system. i am doing this because, during the financial crisis, it has become clearer to me than ever before how much institutions matter. i am therefore concerned with the institutional framework for the monetary, supervisory and regulatory infrastructure. in the usa, the shortcomings of governance in the financial system have been revealed for all to see in the crisis, at the same time posing two major challenges. the first challenge arises from the fragmented structure of financial supervision. in some cases, however, quite new institutional arrangements – that is, institutions – have to be put in place. with its “ blueprint ”, the us ministry of finance has now presented an ambitious but cogent overall strategy for a longer - term reform of financial supervision. it envisages a radically overhauled institutional structure with a complete change of design in its tasks. i see one particularly important aspect of this blueprint in that fact that the fed in the role of a “ market stability regulator ” would, for the first time, institutionalise a primarily macro - oriented perspective on the financial system. i await with keen interest how this debate will proceed. with regard to the second institutional challenge in the usa, namely the review of the monetary policy instruments, a lot has already happened. to begin with, the fed was not so well equipped with instruments for the liquidity policy action necessitated by the subprime crisis. the fed was very quick to create efficiently functioning instruments in the crisis, however. when i now look at the institutional structure for financial stability in germany and in the eurosystem, i would like