loans to small and medium - sized enterprises are significantly cheaper than those for loans to larger enterprises. it will come as no surprise to you that it was the bundesbank that campaigned so hard for this sme - friendly regulation. notably, the basel framework ’ s sme package creates significant incentives for lending to small and medium - sized enterprises. thanks to this regulation, i believe that we have been able to sensibly exert a positive influence on the relationship between banks and enterprises. 4. regulation calls for a sense of proportion if we are to discuss the impact of banking regulation on small and medium - sized enterprises, i believe we must also consider the regulatory implications for small and medium - sized banks and savings banks. the global regulatory reform of the banking sector in the past few years was intended to tighten the regulation of internationally active credit institutions whilst also creating a fair and level playing field worldwide. as a result, however, almost all regulatory measures are essentially aimed at internationally active large banks. this makes absolute sense in the context of the crisis. but here and there, there is a feeling that in applying the rules we may have thrown the baby out with the bathwater ; in other words, we have made the rules so complex that they are overwhelming small and medium - sized institutions. as a result, the debate about the proportionality of regulation is heating up. of course, tighter regulation means a considerable workload for banks and savings banks, as well as for supervisors. but it is also very important to weigh this against the cost to society of financial crises. size is only one of several important criteria that determine whether an institution is “ systemically important ”. other major factors are substitutability, interconnectedness and exposure to similar risks, which is why we cannot simply apply a less complex set of rules to bis central bankers ’ speeches small banks than to their large competitors. instead, these institutions must be regulated in relation to the risk they pose. at this point, i feel it is very important to emphasise that the current regulatory and supervisory frameworks are already largely proportionate. for example, at present, riskweighted capital requirements are calculated differently under standardised approaches and internal ratings - based approaches. furthermore, a portfolio has been introduced to help determine regulatory capital requirements in retail banking. and last but not least, small and medium - sized institutions are benefiting from greater regulatory leeway for business with corporate customers from the sme sector, which are an important client

concession to the banks. personally, however, i believe that the committee has served the interests of the real economy, in particular, without having to compromise on in its efforts to increase the resilience of the banking system. bis central bankers ’ speeches of course, the development of basel iii has and will continue to be accompanied by impact studies that assess the effects of the new rules on financial institutions and the real economy. these studies have thus far come to the conclusion that the short - term economic impact is rather low and are therefore consistent with numerous earlier findings that were able to demonstrate, for instance, that credit institutions ’ borrowing costs would only rise marginally if additional capital requirements were imposed. according to these findings, increasing capital requirements by 100 basis points would, on average, cause institutions ’ overall capital costs to rise by less than ten basis points. turning our attention to the future, tighter regulation actually promotes prosperity because it lessens the likelihood of financial crises. this is a very important point! when talking about the implications of regulation, we cannot focus solely on the short - term costs that the banks are facing – we must also pay attention to the long - term benefits. just think of the many billions of euros of public money that had to be spent in germany alone over recent years to stabilise the banks. in some countries, taking this measure has even plunged governments themselves into significant financial difficulties. viewed from this perspective, i think the price we are paying for stricter regulation is entirely appropriate. of course, the impact that reforms have on the real economy must, nevertheless, always be taken into account. our objective, not just within the basel committee, is to make banks safer and thus minimise the likelihood of financial crises. at the same time, we want to ensure two things in the event of an institution running into trouble : that the taxpayer will not immediately be called upon once again to foot the bill for failings on the part of the bank ’ s management, and that the institution can be resolved without causing any major disruptions. aside from this, the regulation seeks to accommodate those enterprises that rely on bank loans. take, for instance, the basel framework ’ s “ sme package ”, which was introduced under basel ii and updated under basel iii. as part of this package, the capital that has to be held against loans to small and medium - sized enterprises is cut by as much as half depending on probability of default and collateral. as a result, capital costs for