and central bank governors, february 2011. bis central bankers ’ speeches shortcomings in macro prudential supervision … as the importance of systemic financial stability has become apparent, questions on macroprudential policies have become highly topical. unfortunately good answers are outnumbered by open questions. there are few purely macroprudential policy tools, and in many cases policy makers need to rely on micro prudential instruments. the financial sector is constantly changing, and the level of risk does not remain the same. systemic risk is difficult to measure and define. the credit to gdp ratio for example is not a particularly good indicator of risks. financial cycles often last longer than business cycles. the probability of different shocks may be difficult to estimate. their impact, however, is even more difficult to assess e. g. because of nonlinearity. the application of the classical tinbergen rule ( “ one tool – one objective ” ) is not possible. in short : the understanding of how to use which instrument in which situation remains at a very early stage. three layers of shortages can be identified : 1. the analytical framework is short of data ; 2. the instrumental framework is short of experience 3. the institutional framework is short of resources we therefore need to recognize the limits of our understanding ; these difficult questions must be approached with a certain degree of humility. … in spite of progress in the institutional set - up although the toolkits are still in their infancy, institutional progress has been made in macro prudential supervision. in the eu, the european systemic risk board ( esrb ) was established in january 2011. its mission is to contribute to prevent or mitigate systemic risk to the financial stability in the union. the esrb comprises the ecb, the national central banks of the eu, the three new european authorities on banking, insurance and securities, the european commission, and the economic and financial committee ( representing national treasuries ). its role will be to conduct macroprudential surveillance across the eu, to issue risk warnings and recommendations, so as to contribute to the prevention and mitigation of systemic risks. recommendations can be issued to any national or supranational authority. 3 macro prudential policy is viewed as having a wide range of tools from monetary, fiscal and competition policies. but these instruments are under the responsibility of others. in the light of the above - mentioned shortcomings, however, there is the risk that macro prudential becomes policy making

yves mersch : financial sector luxembourg - recent developments and financial stability introductory speech by mr yves mersch, governor of the central bank of luxembourg, at the alfi 2003 spring conference, luxembourg, 11 march 2003. * * * chairman, ladies and gentlemen, it is an honor and a pleasure for me to be invited to join the 2003 spring conference of the luxembourg investment fund association and to hold its introductory speech. my presentation comprises two main sections. the first section is devoted to recent developments in the financial sector, with a specific focus on luxembourg. the second section relates to financial stability issues. 1. recent developments in the financial sector the year 2002 has been, as you all know, a difficult year for the financial industry as a whole. weak economic and financial market conditions have translated into a deterioration in the profitability of the european banks. this deterioration appears to be the consequence of a combination of two major adverse developments in their operating environment. - first, the deterioration in the economic cycle and in the borrowers ’ credit quality, resulting in increased loan loss provisions. - second, the plunge in global and in particular in european stock markets, coupled with increased risk aversion and uncertainty in other financial markets, entailing reduced commissions and trading income from capital - market related businesses. the luxembourg financial sector, characterized by its high degree of openness, has not escaped from the impact of the depressed general environment. in the year 2002, the luxembourg banking sector has seen its net results deteriorating on an aggregated basis by 6 %, although the evolution is unequally spread among the individual financial institutions. while interest margins and commissions, which are their key sources of profitability, have declined in total by 7 % and 6 % respectively, a compensation of this negative trend has partly been achieved at the level of certain individual institutions through an increase in their one - off exceptional revenues and / or a release of previously created general provisions. the one - off exceptional revenues increased in total by 525 million euros, or 132 %, and are related for the major part to capital gains income through the sell - off of the stock - holdings by several banks in cedel, this in the context of the total acquisition of the luxembourg based embedded payment and securities settlement system by deutsche boerse ag. the level of provisions on a net aggregated basis has increased by 595 million euros, or 84 % compared to 2001. a closer look at the figures highlights that within this general increase, which is related in particular