as essential in order to fulfil our objectives. this assessment of the role of research has already led to the build up of significant research capacities within the bundesbank. it has been realised by several efforts like the founding of our economic research center, the appointment of a board of research advisers as well as the creation of research professorships and last but not least an ongoing active participation of our economists in the international academic debate about monetary policy and other economic issues. academic conferences like this on financing innovation have almost become a part of our “ daily business ”. ( although i have to admit a very pleasant one! ) i wish you thought - provoking discussions and a pleasant stay at our conference facilities. thank you very much for your attention.

growth of real loans in germany has been exceptionally low over the last three years. on average loans in real terms to the private sector have even fallen by about one percent per year. this remarkable weakness has to be assessed against the background of a period of very low economic growth. annual real gdp growth was only about ½ percent over the last three years. this of course reduced the demand for external finance significantly. additionally, investment decreased sharply which possibly has been the most important factor behind low credit growth in germany. the decline in investment has been drastic in comparison to the level of economic activity. between 2001 and 2003 real investment fell by over 5 percent a year. this has driven down the ratio of investment to gdp to about 18 percent. compared to the last forty years we have never seen a period where this ratio has been that low in germany. on average it was almost 23 percent. the decline in the investment ratio could possibly be attributed to two factors. first, constructing activities haven fallen constantly since the peak in the middle of the nineties following the reunification boom. this has caused a medium - term downward trend in investment. second, we have seen a dramatic decline in fixed investment recently. this could possibly be explained by some degree of “ overinvestment ” during the new economy boom which reduced the need and capacities for new investment in the following periods. we do not have any indications that this outstanding magnitude of the fall in fixed investment could be attributed to a lack of means of finance or even a credit crunch. as a consequence of germany ’ s weak economic performance credit default risks have increased remarkably during the last three years. the number of insolvencies of private households and enterprises has risen to more than 100, 000 in 2003 - almost 20 % more than 2002. in order to prevent further losses from non - performing loans this has led banks to increase the standards for bank lending. however, this has not led to a general shortage of loanable funds. additionally, our econometric models confirm that the development of real loans is still well explained by weak gdp growth and the downturn of investment. loan growth rates are mostly within the confidence bounds of our empirical benchmarks. this is particularly true for the development of loans to enterprises. the decline of loans in germany was essentially driven by the weak economy and not the other way round. in this connection i ’ d like to add some remarks on basle ii. the rules of basle ii are intended to improve risk controlling of credit portfolio