avoiding distorted incentives. on the one hand, there are “ clawbacks ”, which allow variable remuneration that has already been paid to be reclaimed in cases of severe personal misconduct. on the other hand, payment of variable remuneration may be postponed ; in addition, payment is made partially in stock options. this aims to encourage sustainable decision - making and limit short - term thinking geared only towards profits. the task force on behaviour and culture is a project that is still in its test phase. however, the results are of such great interest for our discussion today that i would like to briefly present them to you now. the task force is working towards developing a methodology for evaluating behaviour and culture in banks. no need to worry – although it may sound vague, i can assure you that this is certainly not the case. in specific terms, it intends to assess the work and cooperation of supervisory bodies and management boards. for instance, are banks implementing planned strategic changes effectively? are there any risk - relevant behavioural patterns in management boards or supervisory bodies? these behavioural patterns can be seen as early warning indicators or even as problem drivers in terms of an institution ’ s financial return and risk profile. the results of the first studies in banks show, on the one hand, that risk - relevant behavioural patterns, such as ineffective leadership and group dynamics, are indeed present and, on the other hand, that strategic changes are, to a certain extent, only being implemented ineffectively. there is undoubtedly a lot of catching - up to do. both the task force on behaviour and culture as well as salary regulation therefore seem to promote ethical behaviour, or, more specifically, to punish illegal behaviour – which is often also unethical. although they do not actively impose values of their own, they punish a lack of values. these measures highlight one thing very clearly : we, as banking supervisors, firmly believe that business needs values. please allow me to now expand upon something that i mentioned earlier : rules alone cannot entrench values in business. there are two reasons for this. first, rules have natural limitations, and, second, values are subjective and must be recognised by each person individually. for now, i would like to delve deeper into the first point – the limits of regulation. 4 the limits of regulation there is one thing that we can all agree on : we need an operational framework and ground rules for business. an operational framework creates trust and thereby attracts investors and customers. for this

all this in mind, one could be forgiven for thinking that it was unethical behaviour which made the financial crisis possible in the first place. financial mis - selling and a focus on shortterm profitability were rewarded, securitisation encouraged opaque and dishonest conduct, and there was no such thing as a realistic assessment of credit risk. there ’ s another example i could mention to show that the market is incapable of regulating itself and that values, it would appear, still haven ’ t made an appearance in some quarters of the banking industry. i ’ m talking about the libor scandal – that is, the rigging of the benchmark london interbank offered rate. bankers colluded to submit fictitious interest rates so as to falsely inflate or deflate libor. this rigged rate then fed into financial transactions all around the world ; many credit or savings products are geared to the libor benchmark rate. so if you ask me whether business needs ethical values, the answer is an unequivocal and resounding yes. and as for the other question i asked just now, my answer would be a definite no. competition, in and of itself, isn ’ t enough ; we need rules to stake out a clear operational framework. leaving the market to its own devices isn't an option. but the question is whether we can achieve this simply with rules and supervision? many a new approach in the world of banking supervision is designed to do just that, but if there ’ s one thing i can tell you already, it is that they will never go far enough. because when it comes down to it, values are beliefs which each and every one of us needs to anchor in our own behaviour. and that is precisely the problem which i intend to delve into later in my speech to you today. 3 new approaches to banking supervision traditional banking supervision aims to maintain checks, create trust, and, ultimately, ensure a stable banking system with solvent institutions. however, some new approaches to banking supervision are going one step further, even if only as a side effect. i would like to introduce two of these measures to you now : first, what is known as salary regulation and, second, the task force on behaviour and culture. salary regulation governs the minimum standards for the remuneration systems of german 2 / 6 bis central bankers'speeches financial institutions. during the course of the reforms following the financial crisis, particular attention in this regard was paid to