##gren ( 1997 ) and gibson ( 1995 ). see basel committee ( 2010 ) for an assessment of the long - term economic impact of stronger capital requirements. financial accounts of the united states. - 7there are lots of reasons for these trends, including technological advancements, financial innovation, regulatory arbitrage, and quirks of history. bank capital requirements, combined with the lack of strong or sometimes any capital requirements in the nonbank sector, are part of that. 14 we should monitor the migration of activities from banks to the nonbank sector carefully, but we shouldn ’ t lower bank capital requirements in a race to the bottom. in times of stress, banks serve as central sources of strength to the economy, and they need capital to do so. we need to worry, a lot, about nonbank risks to financial stability. during the global financial crisis, many nonbank financial firms had woefully inadequate capital and liquidity, engaged in high - risk activities, and were faced with devastating runs that crushed the financial system and caused enormous harm to households and businesses. the collapse of bear stearns and lehman brothers, the failure of fannie mae and freddie mac, the implosion of the insurance conglomerate aig, and many others, laid bare the weakness of nonbank intermediation, and the need to regulate risks outside the banking system. 15 many of those risks remain today. in far too many cases, nonbanks rely on funding sources that are prone to runs and do not maintain sufficient capital to internalize their risks to society. the answer, however, is not lower capital requirements for banks, but more attention to those very risks. further, as stress in nonbank financial markets is often see begenau and landvoigt ( 2022 ) ; darst, refayet, and vardoulakis ( 2020 ) ; dempsey ( 2020 ) ; and plantin ( 2015 ). other examples include money market funds that either broke the buck, froze withdrawals, or received a government bailout ; the failure of the monoline financial guarantors ; the default of aaa - rated securitization vehicles ; and asset - backed commercial paper programs that suffered a run and were unable to roll over their debt. - 8transmitted to the banking system, both directly and indirectly, it is critical that banks have enough capital to remain resilient to those stresses. calibration of bank capital requirements one of the threshold questions is how

concern is how a non - controlled expansion of the digital euro as a form of investment could, indeed, threaten the ability of authorities to properly maintain financial stability. as a matter of fact, a too attractive and accessible digital euro could foster a significant migration of banks deposits, thus compromising their intermediation and lending capacity plus also likely destabilizing the entire banking system in times of financial stress. to prevent these macroeconomic consequences from happening, ongoing discussions are currently focusing on what potential safeguards could be built into the digital euro, yet final decisions remain pretty much open at this stage. the main reason being they not only depend on the practical feasibility of the various available tools but also on the likelihood of different scenarios to materialize and the extent to which the latter may actually compromise banks ’ resilience. as such, the fine - tuning of design features of the digital euro calls for additional research which i strongly believe the members of cebra are best positioned to provide us with. as of today, operational and legal considerations have been the bulk of our work thus far. the digital euro project faces little chance of success unless it can prove to rely on a solid theoretical foundation. that means one that takes into account aspects such as potential distortions of cbdcs to cross - border capital flows, the prospect of a displacement of international reserve currencies or the degree of fragmentation of capital markets they may introduce due to unresolved interoperability issues. hence, the time is ripe to ask and encourage you all to actively consider including cbdcrelated topics in your respective research agendas as means to broadly support our efforts in landing at the best possible blueprint for a digital euro : one that helps maximize its benefits while containing its hazards. and having said that, i think it ’ s about time that we not only feed our minds and souls but our bodies, too. so, thank you very much for listening and bon appetit!