nout wellink : lessons to be learned from the crisis introduction by dr nout wellink, president of the netherlands bank and chairman of the basel committee on banking supervision, at the press conference on the bank ’ s annual report 2009, amsterdam, 25 march 2010. * * * a few words by way of introduction. we are facing extraordinary challenges and painful adjustments. moreover, many lessons can be drawn from the crisis : by bank managements, regulators, supervisors, but also by customers of financial institutions. by pursuing an extremely expansionary monetary and fiscal policy, monetary authorities and governments have prevented the world economy from moving into a downward spiral. but the remedy also carries risks. to ward off a future wave of inflation, central banks need to return to more normal monetary conditions. furthermore, in a great many countries, the huge budget deficits run up must be resolutely scaled back to avoid generating such a strong upward pressure on inflation rates as to stunt economic recovery. decisive and rapid scalingback of budget deficits is also essential to avert an explosion in governments ’ debt positions. monetary authorities worldwide have taken the first steps towards normalising monetary conditions. so has the ecb. the restoration of confidence is key to economic recovery. a government that convincingly tackles its budgetary problems is an overriding factor in rebuilding confidence. a recent dnb survey shows that dutch citizens acknowledge this necessity. the european agreement to narrow the deficit back to below 3 % of gdp by 2013 enjoys broad support. but that alone is not enough. in addition, the netherlands should at least aim to bring the budget close to balance by the end of the new cabinet period. also, the rules under the stability and growth pact must be tightened. the experiences with the greek fiscal deficit have made this painfully clear. the badly - hit financial sector faces a fundamental adjustment over the next few years. it is in everyone ’ s interest that the sector emerges stronger from this process. the timing and method of the government ’ s retreat from the banking and insurance world is crucial. but it is equally important that the sector regains the confidence of society. adjustments in the pension system are needed too. the more difficult it becomes to increase contributions, the more uncertain the pension results and the greater the incentive to lower the pension target. raising the retirement age would significantly advance the sustainability of the system. the delay arisen is therefore regrettable. financial stability hinges on international agreements and coordination. major progress has been realised both globally and

relevance. yes, low interest rates are holding back banks ’ profitability, but our monetary policy is stimulating the volume and strengthening the quality of bank lending so well that its overall impact on banks is, for the time being, positive. if growth is to rise significantly and interest rates return progressively to levels more favourable to savings, economic policies must make a more active contribution. what does that mean in practice? budgetary margins for manoeuvre can be used, where they exist. but in most countries of the euro area they are limited or non - existent. in france, for example, where public debt is verging on 100 % of gdp, another delay in reducing deficits would mean taking an unconsidered risk with business and household confidence. in all of our countries, however, the mix of revenues and expenditure could be made friendlier to investment. and a comparison of current growth rates in the euro area shows a clear advantage for countries that have implemented the most ambitious structural reforms, most notably in their labour markets. 1 / 2 bis central bankers'speeches weak growth, high unemployment and low rates are not inevitable. they reflect the legacy of the crisis but are also a consequence of economic policies that are lacking in ambition. the ecb will continue to protect the euro area from financial shocks, but the monetary climate will not always be so favourable. and the global economy could present new risks. it ’ s time to draw – and act on – the appropriate conclusions. 2 / 2 bis central bankers'speeches