the financial sector not only plays a crucial role in capital accumulation but is also a part of the economy with a distinct value added that contributes to an economy ’ s growth. beyond that, however, the financial system performs another very important task with regard to economic growth : it not only funds innovations but also helps in identifying them. the financial system therefore helps to further the state of know - how and promotes technological progress. sound economic growth relies upon an efficient financial system. with each advancing stage of economic development, the financial system also refines and increases its complexity together with advancements in the real economy. the massive repercussions and enormous costs for the real economy during the current crisis have demonstrated impressively how important financial stability is for economic performance and welfare : the second phase of the crisis, that is after the lehman brothers bis central bankers ’ speeches insolvency in september 2008, not only marked the point of conversion to a systemic crisis, causing transactions on the interbank market to virtually ground to a halt, stock prices to plummet and investors to flee to the safety of government bonds. the disruptions of the financial system were also passed on to the real economy. financing conditions for enterprises and households tightened, and as consumers and firms feared what was still to come, expectations in the private sector as well as the outlook for the world economy deteriorated sharply. as a result, manufacturing and trade were at the heart of the crisis and suffered globally, and particularly in the advanced economies, output dropped at rates hitherto unseen in the post - war period. financial stability has therefore rightly become a top priority on the policy agenda, and the increasing role of the g20 testifies to the global dimension of this task. yet the objective is not to avoid financial crises completely. historically, these crises have occurred regularly over time and can be viewed as an element of market economies. in this context, attempts to increase financial market stability should therefore not be understood as an attempt to avoid crises altogether, but as an attempt to increase the system ’ s resilience and, by doing so, to limit the dire consequences. the usual fear is that stricter regulation may introduce additional frictions and hamper economic growth. the challenge policy makers face when reforming the regulatory framework of financial markets lies in striking the right balance between the stability of the financial system and its efficiency. luckily, both intentions are to a significant degree complementary, and the context is not that of a zero - sum game. well -

all this in mind, one could be forgiven for thinking that it was unethical behaviour which made the financial crisis possible in the first place. financial mis - selling and a focus on shortterm profitability were rewarded, securitisation encouraged opaque and dishonest conduct, and there was no such thing as a realistic assessment of credit risk. there ’ s another example i could mention to show that the market is incapable of regulating itself and that values, it would appear, still haven ’ t made an appearance in some quarters of the banking industry. i ’ m talking about the libor scandal – that is, the rigging of the benchmark london interbank offered rate. bankers colluded to submit fictitious interest rates so as to falsely inflate or deflate libor. this rigged rate then fed into financial transactions all around the world ; many credit or savings products are geared to the libor benchmark rate. so if you ask me whether business needs ethical values, the answer is an unequivocal and resounding yes. and as for the other question i asked just now, my answer would be a definite no. competition, in and of itself, isn ’ t enough ; we need rules to stake out a clear operational framework. leaving the market to its own devices isn't an option. but the question is whether we can achieve this simply with rules and supervision? many a new approach in the world of banking supervision is designed to do just that, but if there ’ s one thing i can tell you already, it is that they will never go far enough. because when it comes down to it, values are beliefs which each and every one of us needs to anchor in our own behaviour. and that is precisely the problem which i intend to delve into later in my speech to you today. 3 new approaches to banking supervision traditional banking supervision aims to maintain checks, create trust, and, ultimately, ensure a stable banking system with solvent institutions. however, some new approaches to banking supervision are going one step further, even if only as a side effect. i would like to introduce two of these measures to you now : first, what is known as salary regulation and, second, the task force on behaviour and culture. salary regulation governs the minimum standards for the remuneration systems of german 2 / 6 bis central bankers'speeches financial institutions. during the course of the reforms following the financial crisis, particular attention in this regard was paid to