the leverage ratio, and there are also two new liquidity ratios, capital buffers, loss - absorbing capital and individual capital add - ons under the supervisory review and evaluation process ( srep ). these are worthwhile additions from a supervisory vantage point because they give us a tailormade toolkit to control the various risks which can cause a bank to fail. but for credit institutions, the new system means that their management systems now have to take into account not just one metric, but several of them. so a decision whether or not to grant a loan no longer depends solely on the return and the efficient allocation of equity, but also, for 3 / 4 bis central bankers'speeches instance, on the impact on the balance sheet structure, which is regulated by the net stable funding ratio ( nsfr ). the toughest challenge probably lies in coping with the interplay between the various minimum standards and the need to simultaneously adhere to minimum capital requirements, the leverage ratio, requirements for an institution ’ s liquidity and balance sheet structure as well as varying point - in - time and institution - specific criteria – on this magnitude, this is uncharted territory. what all this means is that the optimisation problem suddenly becomes much more complicated, raising the question as to whether compliance can be achieved by means of a simple equation. or does a more multifaceted approach need to be adopted? it is precisely this complexity which makes a smart approach to integrated risk management so crucial. there is the question, of course, of the levels which this integrated management approach ought to address. can different metrics be broken down to individual business activities? or does it make more sense to look at the bank as a whole or at portfolio level in order to identify risk drivers and render management measures more transparent? all this is forcing institutions to rethink both their operational and strategic set - ups. one aspect, i believe, is particularly crucial. institutions should not and cannot steer their business solely on the basis of compliance with the regulatory minimum requirements. even if i do have to concede that the rules which supervisors including myself have created naturally curtail the scope of management action. but there is nonetheless still a great deal of entrepreneurial scope which institutions can capitalise on – by running smart business models, by adopting innovative strategies, and by smoothly putting them into operation. business models that operate solely on the basis of satisfying the regulatory minimum requirements cannot be successful over the long run. adhering to the minimum requirements

hermann remsperger : euro markets in a global context speech by professor hermann remsperger, member of the directorate of the deutsche bundesbank, at the gulf euro summit, held in dubai, on 8 october 2000. * * * i european economic and monetary union ( emu ) has brought about important changes in the framework for financial markets. this is particularly true of the 11 european countries which have merged their national currencies into a single currency, the euro, and which have been conducting a common monetary policy since 1999. however, these changes also apply to market participants in other countries which maintain economic and financial relations with the countries participating in emu. they, too, no longer have to deal with different emu currencies but only with a single one. thus, non - participating states have increasingly perceived the emu countries as a single area. let me start by saying that the euro area represents a relatively large economy. in economic terms, the euro area comes close to the size of the united states ; both economic areas are far larger than japan. measured in terms of world gdp, the us share is about 20. 8 %. the share of the euro area amounts to 15. 5 %. it is significantly larger than that of japan ( 7. 4 % ). the population of the euro area, at around 290 million, is larger than that of the united states ( 270 million ) and of japan ( 125 million ). the size and capacity of an economic area is of significant relevance to its currency and to the evolution of its financial markets : economies of scale play an important role, especially in determining the degree to which the money is used. a large economic area generates a large “ natural constituency ” for its own currency. if a currency is widely accepted, this normally lowers transaction costs, thus attracting international customers and spreading the currency even farther beyond its domestic area. the argument of size is all the more important since the euro area is highly integrated into the world economy. the euro area accounts for one - fifth of world trade, excluding trade within the euro area. this is more than the corresponding ratio for the united states, which is 15 %, or japan, which is just under 9 %. 1 ii if the three large economic regions are examined with respect to their different financing structures then it quickly becomes apparent that loan - based financing via the banking sector is still important for the euro area. the volume of credit which euro - area monetary financial institutions have