directive also introduces an eu passport allowing alternative investment fund managers to market alternative investment funds to professional investors throughout europe. in a single european market for financial services, a harmonised set of requirements is indispensable. moreover, corporate governance and investor protection should be improved. the aifm directive makes an important contribution to all these points. as i have already explained, this does not only entail duties – it also creates large opportunities. for instance, the introduction of an eu passport further improves private equity funds ’ marketing options. moreover, enhanced transparency is likely to strengthen investors ’ confidence in private equity firms. this could place the debate on private equity, often very emotional in the past, on a more rational footing. macroeconomic assessment group, assessing the macroeconomic impact of the transition to stronger capital and liquidity requirements, august 2010. bis central bankers ’ speeches in summary : i believe that the aifm directive makes an important contribution to regulating alternative investments in the european union. the benefits of the directive should far exceed the costs that regulation imposes on those involved. i am certain that your industry will adapt easily to the new rules and make the most of the resulting opportunities. 5. beyond basel iii : the new regulations and the shadow banking system although the g20 reform agenda has largely been successfully implemented, there is still a long way to go before the international financial system can be compared with the transparent glass courtyard in which we find ourselves today. as a “ guardian of financial stability ”, i am particularly interested in the “ dark corners ” of the financial sector : the “ shadow banking system ”. before i start and by way of introduction, i would like to stress that bank - like transactions outside of the banking sector should not per se be regarded as a bad thing, even if this might be implied by the common – but in my opinion misleading – term “ shadow banking system ”. there may well be advantages in certain activities being carried out by specialised enterprises rather than banks or in banks outsourcing these activities to them – provided the specialists are indeed better at managing the associated risks. the shadow banking system should therefore certainly not be treated with disdain or seen as criminal, nor should its activities be prohibited. rather, the objective is for financial supervisors to have at their disposal sufficient information on any activities which could jeopardise the stability of the financial system. amongst others, stricter regulation of banks will provide them with an incentive to transfer activities or assets to less regulated areas. this must not

mean that these risks move off supervisors ’ radar screen. it is therefore indispensable that the shadow banking system be monitored in addition to the regulated banking system. at this point, i would like to explicitly promote greater transparency. of course, i am aware that more extensive reporting requirements entail higher costs ; however, given the potential systemic risks emanating from the shadow banking system, i believe that such a price is more than justified. in particular, those involved must provide insightful reporting and meaningful statistics. to date, the size of the shadow banking system could only be estimated based on the national accounts. this puts the size of the german shadow banking system – definitions are naturally difficult here, i will nevertheless make a cautious estimate subject to the usual reservations – at around 17 % of the assets of the banking sector. however, this includes investment funds in general ; excluding them, the figure would be less than 4 %. in any case, its volume would be far lower than in the united states, where the shadow banking system is larger than the banking sector itself according to first estimates by the new york fed. good oversight also makes it easier to check whether regulatory requirements are appropriate. the responsible bodies will not take action for action ’ s sake ; in my view, regulation is not intended to restrict market activity, but to contain risks to the stability of the financial system. this also means that we will prevent any flouting of the stricter banking regulations set forth in basel iii and the planned regulations for sifis. comparable activities and risks must be subject to comparable regulation. after all, all market players benefit from greater financial stability. what players are in the light, which in the shadows? the answer to this question is likely to be of particular interest to the present audience. however, the interested public is also demanding an answer to this question, and confusion and misinterpretation are commonplace. i would therefore like to take this opportunity to make a contribution to this ongoing debate and provide a basic classification of private equity. at the behest of the g20, the fsb is currently drawing up recommendations to monitor and regulate the shadow banking system. and this committee recently defined what that means, namely “ credit intermediation involving entities and activities outside the regular banking system ”. this bis central bankers ’ speeches credit intermediation can involve non - banks such as special purpose vehicles and money market funds. however, the definition also comprises activities such as, for instance,