loss absorbing capacity of banks, tlac in short, which the g20 leaders will hopefully finalise at their summit in antalya next month. the same principle applies to the european institutions, but implementation here is based on what is known as the mrel standard, which differs in some respects from the tlac requirement. one difference is that the minimum requirements will be set individually for each institution by the competent resolution authority. these new standards will have a transformative impact on the market for loss - absorbing debt capital. they will introduce new instruments and will enhance standardisation of subordinated debt. in combination with new disclosure requirements, these standards will lead to transparent, attractive investment opportunities. but, at the same time, this will also lead to the pricing in of the increased probability of a bail - in – in other words, investors will demand higher risk premiums. 7. challenge 3 : learning to live with different market structures this brings me to my third challenge, namely adapting to new, different market structures. what do i mean by that? two things : first, market structures are going to be different than before the crisis – in particular less liquid ; second, in such a new environment, banks need to adapt their strategies to survive. while both trends will be monitored closely by supervisors, it is the banks and market participants that have to adapt. let ’ s think first about the market environment before i come to banks and their business models. before the financial crisis, ever - present liquidity was the touchstone of the free financial markets philosophy. the belief was that, if only demand and supply of a tradable asset were sufficiently high, you could assume perfect, frictionless markets. but this was an illusion. rather, the pre - crisis ‘ liquid ’ market structure resulted in interconnectivity and the well - established problems of “ too - interconnected - to - fail ” and “ too - many - to - fail ”. moreover, this liquidity supported unsustainable trading strategies and short - termism. now, in the post - crisis environment, in which tougher regulation is one element, we have witnessed several new dynamics resulting from changing market structures. particular attention has been paid to extreme, unexpected price movements that seem to have come from nowhere. the incident which received the most attention was probably the so called flash crash of 2010. on may 6 of that year, investors were stunned when the dow jones plunged almost 6 per cent before recovering –

effect, it will be absolutely crucial that we identify any potential interactions of this kind and, as far as possible, avoid them. this is quite clearly anything but an easy task. it means weighing up the aims and effects of various measures. it could also mean that measures which have already been adopted have to be amended or revised while they are in the process of being implemented or soon after. the latest example of this is the revision of the liquidity standard by the basel committee. having said that, however, it should be clear to both the general public and those affected by regulation that this is not a case of watering down measures once they have been adopted. rather, it is matter of taking due account of systemic aspects of regulation so as to avoid possible unwanted consequences. 5. conclusion ladies and gentlemen the international regulatory agenda is not a patchwork. rather, it represents an all - embracing approach covering a wide range of issues from institutions to financial markets to individual instruments. this coherent strategy consists of several interlocking structural elements, the overall impact and potential interactions of which have to be carefully analysed. for it is only with an internally consistent regulatory agenda that we can make the international financial system more stable and more resilient to crises. in order to achieve this goal, the international agreements now finally also have to be consistently transposed into national regulations and laws. even if slight delays to the original timetables cannot always be avoided, there should be no doubt about the determination of all the g20 countries, including the eu, to continue fulfilling their commitment to implement the reforms. thank you for your attention. i look forward to the ensuing discussion. bis central bankers ’ speeches