blind – faith in rating agencies and their assessments cannot be justified as the massive downgrading of entire vintages of securitisations demonstrates the instability of ratings across a cycle and highlights the inadequate scrutiny of the assets underlying securitisation products. • sustainability is also a question of accounting, which is based to a large extent on current market value : firstly, if valuations are allowed to shoot up in good times, they will have all the further to nosedive during a downturn. it is a well - known fact that the hangover the day after is worse the wilder the party was the evening before. and secondly, the compass of market value fails if market functions are disrupted. iii likewise, it would not be very sustainable if regulators were now to respond to the numerous individual problems by intervening with an equally large number of individual measures. rather, the strengthened international cooperation that has emerged during the crisis is an opportunity to devise a closed and coherent regulatory framework that sets the right incentives. • the scope of supervision is all about setting the right incentives ; here, the g20 made an important policy decision back in the autumn of last year : all financial market players – including near banks and shadow banks – must be regulated ; 1 • the issue of “ incentives ” also comprises the past practice of arbitrage between the banking book and the trading book, which the new basel regulations aim to avoid. • ultimately, this includes a review of the rules that allowed the crisis to emerge ; o eg legal constructions such as non - recourse mortgage loans, which are used in some countries and were instrumental in promoting borrowers ’ willingness to take out subprime loans ; o other rules that need to be reviewed are capital requirements for liquidity facilities or the favourable capital requirements for securitisation tranches ; major progress has already been made in this field with regard to greater transparency and risk - oriented capital charges. however, the practice of measuring the leverage ratio solely by on - balance - sheet items – as happens in some jurisdictions – also creates incentives to establish off - balance sheet special purpose vehicles. iv in order to avoid getting mired in detail, we need to keep our eyes on the big picture in terms of the effects of the many proposals for new rules. i would like to illustrate this with an example relating to regulatory capital ; a whole range of measures are currently being discussed : • the definition of regulatory capital, • the general increase in minimum capital requirements, • a capital

##platz germany ”, or germany as a financial centre. above and beyond the procedures in large - value payments, the year 2000 problem naturally impinges on all the other business areas in which the central banks are involved. i would therefore like to use this opportunity to give you a brief overview of our year 2000 project. the bundesbank is giving top priority this year to the year 2000 problem and took steps at an early stage to ensure the year 2000 compliance of its in - house procedures and systems. for example, for some years now we have been paying attention to year 2000 compliance not only in the design of new procedures but also when modifying and updating existing ones. the introduction of the euro on january 1, 1999 gave us a special advantage. this meant that a large number of systems and applications were completely redesigned and put into operation by that date, with due consideration naturally being given to year 2000 requirements. this gave us extra time to come to grips with the much broader year 2000 problem. in 1997, the bundesbank established a working group for the year 2000 problem. this working group initially drew up an inventory of all the affected systems and procedures. any required adjustment measures were initiated. we contacted the suppliers and manufacturers and awarded the necessary conversion contracts. current activities are geared to the deadline of july 1, 1999, which was set by the bundesbank ’ s management for completing the year 2000 readiness of all the affected systems. an earlier date would not have been possible on account of the priority of carrying out conversion work for stage three of european monetary union. preparations are running on schedule. preparation work in the european system of central banks is also running full steam ahead. a committee of senior representatives of the 15 national central banks and the european central bank, who are experts in computer technology, is coordinating the steps which are needed to make systems and applications throughout the escb — especially those used for refinancing and payments in the emu — ready for the year 2000. at present, the systems and applications between the national central banks and the ecb are undergoing intensive testing in order to make certain that the processing of data is year 2000 compliant. despite all the efforts which are being undertaken at our level, it should not be forgotten that the ability of the entire banking industry to function depends on an adequate supply of basic amenities such as electricity, gas, water and telecommunications services. hence, our preparations must not be confined to testing our own systems and applications. precaution