have clearly shown how devastating contagion can be! it is thus all the more surprising to see how in the current environment some policy makers, academics or editorialists totally ignore the systemic dimension of financial markets in their proposals for very specific issues like for instance bank debt. thinking that a specific category of assets – such as senior bank bonds – can be treated in a specific way without immediately affecting all other assets, or that certain banks can be treated in a way that does not impact the whole system, not only within a country but also cross border is a testimony of short memory. the same applies for sovereign debt instruments. the risks related to the re - emergence of global imbalances and any disorderly unwinding are also considerable. moreover, the catastrophe in japan and tensions in the middle east show us that risks of various sorts ( natural, geopolitical, etc … ) are never far away. in addition, a new round of stress tests is being carried out between march and june this year, with the final set of results to be published in june. there have been many comments and discussions about these stress tests, often without sufficient information. there is no doubt that the success of these tests depends on their full understanding on the parts of market participants. it is thus essential that supervisory authorities coordinate closely within the eba their communication strategy. it ’ s no time for cacophony, nor for national authorities to engage in a beauty contest. compared to the previous round, the underlying scenarios are considerably more adverse, in particular in terms of overall decline in gdp which encompasses the sum of all the parameter changes ( interest rates, haircuts, probability of default, … ). the probability of the scenario is, over a two year horizon, much lower, especially for 2011 where it is 1 %, instead of 7 % last year. moreover, national supervisors and banks will have less discretion in conducting the tests. this time the eba will be giving direct guidance regarding the definition and projections of pre - provision operating profits, including the increased cost of funding. the thresholds in the stress tests will be set at levels which are substantially higher than the minimum solvency requirements. bis central bankers ’ speeches banking regulation is becoming stricter in a broader sense, europe has been actively contributing to stronger prudential supervision, notably banking supervision. at both global and national levels, there has been a marked tightening of banking and prudential rules. work on corporate governance and internal audit has progressed

backing of the organisation ’ s top management, even when they convey unpleasant or unwelcome messages. and secondly, the auditors can only do their job properly if they are empowered to act autonomously. central bank cooperation – a long - term investment that will bear fruit i have sought today to shed some light on the importance of various tools for the soundness of our financial systems : banking supervision, internal audit, micro and macroprudential supervision as well as audit and corporate governance. the “ investment ” that this programme has made in banking supervision, as society ’ s “ systemic financial risk management ”, and in internal audit, as an element to help an organisation achieve its objectives, is fully in line with this approach. i am confident that the investment will bear fruit in the years to come. bis central bankers ’ speeches finally, let me thank all those involved in this project – the eu delegation, the bank of russia and also the colleagues from the eight national central banks and the ecb. it ’ s the close cooperation in these uncertain times which has made this remarkable project so successful. i sense that, although we are concluding this particular venture, the challenges of the future and the very positive experience of this programme will certainly justify new partnerships in the future. i sense that there is no shortage of interest and enthusiasm to join forces again. many thanks to all those who contributed. and thank you for your attention. bis central bankers ’ speeches