, mrel, lcr, nsfr, leverage and so on, but still have little prospect of making the profits demanded by investors? might the incentive to do business in the banking sector be weakened? are we contributing to a shift of business not only outside our countries, but, more dangerously, outside the regulated market? these fundamental questions are not prompted solely by the recently adopted or planned regulatory changes. we also have doubts about the existing deposit insurance system of full cover up to eur 100, 000 adopted at the start of the financial crisis. at the time, this measure certainly helped calm the public and prevent runs on banks. however, we feel that the time has come to consider a return to normal, to reintroduce the system where depositors are not fully covered, at least with respect to non - sifi banks. i think the question that forms the title of this conference is very topical and relevant. we believe that the time has come to pause and try to discuss these issues seriously. bis central bankers ’ speeches as to costs, supervisory authorities are also incurring high costs. on the european scale, we are recruiting hundreds of new employees to be able to meet the challenges of applying the new regulations. mandatory impact assessments have been introduced, but these often sound like unconvincing or formal justifications for a result known in advance : “ there will be costs, but the benefits will outweigh them in the long run ”. as to complexity, we have plenty of evidence that the current sectoral approach to regulation does not make our life as supervisory authorities any easier. we are often creating three parallel but materially identical sets of basic requirements for banks, insurers and investment firms. it would be simpler to have just one set of basic licensing requirements, one set of basic requirements for general managerial skills and one set of basic requirements for the trustworthiness of senior officers for the entire financial market. we would welcome a single, universally applicable set of assessed functions and requirements for sound internal control systems. examples could include harmonised basic requirements for outsourcing and for the distribution of own and third - party products. it is impossible, of course, to unify all requirements across the financial market. however, the basic set could, or even should, be unified. even if we succeeded in harmonising only onethird of all the requirements, the quantity of regulations would decrease sharply. this would substantially reduce the load on financial institutions, which are currently

for policy decision - making. the entry of the czech republic into the european union in may 2004 has not so far created any serious issue in respect of the practical forecasting of the czech economy. however, we can identify two issues related to the future development of the forecasting system. the first one relates to the comparability of the cnb ’ s forecast with the rest of the forecasts produced by the escb members. as i mentioned earlier, the cnb produces an unconditional forecast that includes a reaction function of the central bank. however, this is not the case with the rest of the escb members. although there is a tendency towards the use of unconditional forecasts and the bank of england and sveriges riksbank have started to use at least the trajectory of the short - term interest rate derived from the money market term structure instead of an assumption of a constant short - term interest rate as a base for their forecasts, conditional forecasting still plays a crucial role among the escb members. this, of course, seriously reduces the comparability of the results. second, the forecasting system and the modelling framework have not yet been adjusted to our expected entry into the erm ii and the euro area. erm ii participation clearly raises the question of consistency between the “ low ” inflation environment required by the maastricht inflation criterion and stability of the nominal exchange rate, both in a converging economy. recent experience among the new eu member countries provides some evidence on the difficulties of fulfilling the maastricht inflation criterion amid a stable exchange rate. the issue to be solved is to what extent the forecasting system should reflect the dualism of the targets, or whether the policy rule should consider the inflation target only, leaving the exchange rate as a fully endogenous variable. similarly, the forecasting system will have to be adjusted once the czech republic enters the euro area and policy is set by the ecb governing council. it is worth mentioning that the development of our forecasting system has been part of the wider evolutionary process that the czech inflation targeting regime has gone through. the first years of the new regime were not easy, and included frequent numerical target misses. nevertheless, the czech republic enjoys low inflation, and inflation expectations seem to be firmly anchored at low levels at present. monetary policy decision - making is rule - based and transparent, thereby enhancing the credibility of the cnb. let me conclude with the statement that a