andreas dombret : addressing proportionality in europe speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the 13th bcbs - fsi high - level meeting for africa on " strengthening financial sector supervision and current regulatory priorities ", cape town, 24 january 2018. * * * 1. introduction dear fernando restoy ladies and gentlemen welcome to the second half of the day. i am very happy to be here – both here to discuss with you, and here in south africa. it ’ s no secret that speakers customarily try to set a good mood when they begin their remarks with a few nice words about the places they visit to speak. i ’ m usually not one of those persons – except in south africa. south africa is truly one of my favourite destinations in the world, and i visit this country several times each year. now it ’ s not always fun and games : i usually have some work to do when i get here. but the fruitful interactions with my valued colleagues from the sarb and others from the african central banking and supervisory community have always made the trip worthwhile. saying that, i am also looking forward to the discussion with you today. before the lunch break, bill coen and adam farkas already spoke, among other things, about basel iii. i would like to follow up on that and – given that, as a member of the basel committee, i was involved in the negotiations – say a few words from my own perspective as well. with that, i will lay the groundwork for the remainder of my talk, in which i will focus on implementation of the basel rules and state my case for proportionality. 2. the long road to basel iii many observers of the basel negotiations – journalists, politicians, industry representatives and fellow colleagues from the central banking and supervisory community – have repeatedly asked me the same question : why did it take so long to finalise basel iii? after all, significant parts of the reform had already been agreed upon in 2010, yet it took us about seven more years to finalise the reform. as i can understand this question very well, let me try to answer it. i see two main reasons why it took so long. first, our task was extremely complex on a technical level. we had to balance multiple, intertwined goals – always with an eye on potential unintended consequences. there were plenty of open questions. do the new rules distort risk

erkki liikanen : the case for structural reforms of banking after the crisis speech by mr erkki liikanen, governor of the bank of finland and chairman of the highlevel expert group on the structure of the eu banking sector, at the european commission, brussels, 2 october 2012. * * * changes in banking in the run - up to the crisis in the years preceding the financial crisis that started in 2007, global financial institutions had grown ever bigger in size and scope and their organisational complexity had increased. their leverage had strongly risen and their average debt maturity had shortened. behind these trends were forces that intensified competition in banking, driven by technological development. an entire shadow banking sector had developed, comprising a chain of non - bank institutions which were able to provide similar financial intermediary services as traditional banks. in this environment, regulatory reforms were partly a response to the changes and allowed banks to cope with the increasing pressure from non - bank competitors. banks sought for economies of scale and scope and strived to take advantage of diversification benefits from multiple sources of income. commercial banking had increasingly moved away from customer relationship - based banking where loans are granted and then held until maturity to the “ originate and distribute ” model where granted loans are pooled, then securitized and sold to investors. this shift in the business model increased traditional banks ’ connections to the shadow banking sector. the expansion of banks ’ balance sheets partly reflected the growing global imbalances, supported by the accommodative monetary policy stance in the early 2000s. regulation, supervision and market discipline failed to counter the developments in the financial sector. the basel capital requirements on banks proved ineffective in restraining the strong growth in banks ’ leverage and balance sheet size. for example, the basel rules effectively allowed banks to lower their capital requirements by means of securitizing loans. this is an important reason for how and why banks became strongly connected with the shadow banking sector. the increasing complexity of structures and products, as well as the financial sector ’ s increasing interconnectedness and growing size, led to reduced transparency of bank balance sheets. this should logically have rung alarm bells among investors, especially among banks ’ uninsured debt holders, but the opposite seems to have happened : the markets rewarded bank size by charging lower debt margins from the biggest institutions. this suggests that there was a perception among market participants that the biggest financial institutions enjoyed an implicit public guarantee ; in other words, they had become too big or