capital requirements would be unacceptable : for example, a 75 % output floor would affect half of international banks. it would de facto result in creating a “ basel iv ” framework based on the standardised approach. the output floor is to serve as a backstop, not as the primary driver of capital requirements : yes to basel iii, no to basel iv. having said that, the main issue now is no longer the solvency of banks, but the liquidity of non - banks. therefore the bulk of the regulatory efforts must now be focused on the shadow banking system, which has risen from usd 73 trillion of assets in 2007 to usd 92 trillion in 2015ii – i. e. 150 % of total gdp – in the jurisdictions monitored by the financial stability board. and those parts of shadow banking that may pose financial stability risks represent usd 34 trillion ; two - thirds of which is composed of collective investment vehicles ( civs ) with features that make them susceptible to runs. it is thus of key importance that authorities develop and use system - wide liquidity stress - testing tools, in order to address the risks of a “ funds - run ” in adverse market conditions. the fsb decided on this ; it has to be implemented with a strong commitment by iosco and national regulators. the third main area of work is the regulatory framework for central counterparties ( ccps ). the clearing obligation of otc derivatives has fortunately reduced otc transactions, but as a result ccps have also become more and more systemic and concentrated. the fsb guidance on a recovery and resolution framework, which is currently being transposed into eu legislation, is a good step forward. faced with brexit, europe has the additional imperative of not letting sources of systemic risk for the eu grow outside the eu. in this regard, the proposal recently made by the eu commission is a step in the right direction, but it should be streamlined and strengthened to make sure that euro - denominated clearing activities are supervised and so located in the european union when they exceed certain thresholds. one additional word about cyber - risks : as we have been reminded by the two viral attacks carried out in the last two months, we are at the same stage that medicine was at before pasteur and vaccinations. the challenge is to take swift and decisive actions to enhance cyber resilience in the financial system, building notably on the g7 recommendations : the g7 is, at this stage, the key forum to act.

mr. hartmann reports on the driving forces behind current changes in payment and settlement systems speech by mr. wendelin hartmann, a member of the board of the deutsche bundesbank, delivered at the 6th annual conference on international payment systems in london on 20 / 4 / 98. there are several driving forces behind current changes in payment and settlement systems. as a political factor, we are all aware of the start of stage three of european monetary union ( emu ) on january 1, 1999 with the introduction of a single currency and a european monetary policy. change is also being caused by developments in the highly liquid and mobile markets. volume and value of transactions in these markets are still increasing and markets ’ liberalisation and interdependence is continuously growing. last but not least, technological advances are leading to an improvement in communications technology and a lowering of costs. the internet is likely to become universally comparable to the telephone nowadays. let us now take a look at the current situation in international payment and settlement systems. the use of correspondent relationships is customary for the execution of cross - border payment orders. this results, for example, in larger banks having hundreds of correspondents in europe. one cause of this can be seen, for example, in the fact that banks mutually attend to credit customers and to large - value payments between third countries ( such as japan and hong kong ). but this variety of relationships may lead to a complicated liquidity management and high costs. european cross - border retail payments could almost be said to be still in the “ middle ages ” : they are characterised by high fees, long execution times and very little transparency. this situation led to the eu directive on cross - border credit transfers ( transparency directive ) coming into force early 1997, the outcome of which has, up to now, regrettably been mediocre. as an example, if we compare the cost and time taken for a credit transfer of frf 5. 000 from frankfurt to paris, the fee charged by the different german banks varies - according to a german newspaper from dem 20. 00 to dem 60. 00 and the processing time takes between two and 14 days. the statistical reporting requirement of cross - border orders cannot be construed as an adequate explanation for this. on the contrary, the european market will require considerable improvements in this field. another obstacle is, for example, the lack of a common european bank - code number, branch identification and account number. the european committee for banking standards