sifis enjoy, thereby reducing misguided incentives to take excessive risks and countering competitive distortions. nevertheless, it was clear from the outset that strengthening sifis ’ loss absorbing capacity would not be enough. we should remember and be very clear that failures are part and parcel of a market economy. unfortunately, the crisis has revealed a significant lack of suitable instruments for effectively dealing with failing financial institutions. these gaps in bis central bankers ’ speeches legal frameworks must be addressed. sifis, too, must be able to exit the market in an orderly manner that does not expose taxpayers to the risk of loss. a number of jurisdictions have already adopted legislation to improve their resolution regimes. for instance, the german restructuring act, which came into effect at the beginning of this year, includes a significant extension of supervisory powers, allowing authorities to restructure and resolve banks. yet, despite the progress made at national level, obstacles to the effective resolution of financial institutions remain. national resolution regimes are clearly stretched to their limits when it comes to globally operating sifis. one of our main tasks in the coming months will therefore be to ensure mutual compatibility between different national resolution regimes. in this regard, the fsb key attributes of effective resolution regimes for financial institutions, which were also endorsed by the g20 in cannes, represent a major leap forward. 1 the key attributes constitute a new international standard and serve as a point of reference for the overhaul of national resolution regimes, setting out elements needed for enabling the orderly resolution of financial institutions, irrespective of their size or importance. the key attributes require jurisdictions to have a designated resolution authority in place that possesses all necessary powers to intervene in and resolve financial institutions that are no longer viable. this includes specific legal powers as well as the operational capacity to implement orderly resolutions. in addition, for internationally active firms, institution - specific cross - border cooperation agreements should and will be established. the key attributes also call for the establishment of recovery and resolution plans ( rrps ) for global sifis, supported by resolvability assessments to evaluate the feasibility of resolution strategies. the objective of these plans is to organise the recovery or resolution ex ante in such a way that systemically important units or functions can be maintained without systemic disruptions. following their endorsement by the g20, the key attributes now have to be put into effect across jurisdictions. this will require substantial efforts by both national authorities and financial institutions. legislative changes will be needed in many

what the future holds – benefits and limitations of forward guidance speech at the european banking congress 22. 11. 2019 | frankfurt am main | jens weidmann 1 introduction 2 clarifying the reaction function 3 lower for longer 4 achieving price stability in the euro area 5 conclusion 1 introduction ladies and gentlemen, more than 200 years ago, french scientist pierre - simon laplace proposed that the universe was essentially deterministic and, hence, predictable. some being – later called a demon – with sufficient information and calculating power would be able to know all the states of the universe : past, present and future. in today ’ s financial markets, laplace ’ s demon could easily earn a fortune. but despite all the progress in computing, it has never come into existence. still, some people may dream of its possibility. brazilian author paulo coelho once quipped that everything was possible : “ from angels to demons to economists to politicians ”. financial market participants are no demons : they carefully monitor every word uttered by central bankers, because failing to anticipate the central bank ’ s next move could be costly. for a long time, central bankers were reluctant to provide hints on their expected future course of action or communicate openly. a good example is former fed chair, alan greenspan, who once told congress : “ if i seem unduly clear to you, you must have misunderstood what i said ”. [ 3 ] and according to otmar issing, central banking was “ presented as an esoteric art ”. over time, monetary policy has clearly become more of a science and less of an art. economists have formulated reaction functions, which are supposed to summarise how central banks respond to economic conditions. often, relatively simple rules such as a common taylor rule are considered. of course, monetary policymaking is much more complex than that. but just for the sake of argument, i would ask you to think of such a standard rule when it comes to the reaction function. central banks have also increased transparency and extended communication in order to enhance their accountability to the public and make monetary policy more effective. in the wake of the financial crisis, as policy rates approached zero, more and more central banks switched from dipped beam to full beam : using forward guidance, they began to shed light on their reaction function. by indicating that they would withdraw the monetary policy stimuli later than the public expected at the time, central banks attempted to further reduce longer - term interest rates when policy rates had already reached low levels