specific tool, and is the preserve of the national central bank that issues the currency. bankruptcy laws, resolution powers, bank regulatory regimes, and the fiscal powers that might be needed in a crisis all operate at the domestic level. the effect of subsidiarisation, at least in principle, would be to ring - fence the national operations of cross - border banks within separate legal entities in the countries where they operate. there ’ s a good argument that that kind of structure would simplify the management of financial stress events. it might also reduce concerns about cross - border arbitrage of differences in capital regulation. i am aware that there are also arguments on the other side. in some instances, ring - fencing might not be a realistic option, or host countries might prefer foreign banks to enter as branches in order to benefit from the full support of the parent. some would argue that concerns about cross - border resolution could be better addressed in other ways. another point is that the subsidiary structure is likely to be more expensive to operate. but i ’ m not sure we should view that on its own as a decisive argument against it. a lot of the post - crisis regulatory changes will add to the cost of financial intermediation, but they are being done anyway to reduce systemic risk. the point is that the costs and benefits need to be carefully weighed. so there are arguments on both sides. i ’ m not today seeking to present a firm view, but i think it ’ s an area that hasn ’ t been sufficiently debated, and so i simply raise it as one that deserves further attention. 7 supervision and lending standards i started out by saying that there ’ s more to financial regulation than just the basel committee. there ’ s also more to financial stability than just having good regulations. the best possible set of regulations won ’ t, on its own, stop the next crisis, for the simple reason that every crisis is different, people innovate around regulations, and you can ’ t regulate against foolish behaviour. i don ’ t want that to be interpreted as a counsel of despair. good regulation obviously makes a difference, and the effort to improve our regulatory regimes, and keep them up to date, has to be made. but we also need other things that are hard to convert into rules ( and i ’ m talking about the international scene here ) : we need bankers and investors who don ’ t take silly risks, supervisors who are prepared to ask tough questions and step in when they

by deposit guarantees may be lost. the financial industry must therefore be forward - looking. buffers must be built up in periods of expansion when losses are low and profitability is high. the financial safety net must be reassessed if it is so favourable that banks and market participants are not encouraged to exercise market discipline. for example, deposit guarantees in norway cover larger amounts than in many other countries. despite the lessons that both the authorities and the financial industry have learned from financial crises, such crises may nevertheless occur in the future. experience indicates that crises are often a result of inherent processes in the financial system. there is still reason to hope that the authorities through their policies and formulation of rules and the financial industry through its management of risk will reduce the frequency of financial crises. thank you for your attention.