day to come. in the next hour, we will examine the reasoning for macroprudential policy from an international perspective, from a financial stability perspective, and from a theoretical perspective. we hope this will establish common grounds for the discussions we will have the rest of the day. my co - hosts poul thomsen from imf and david lando from copenhagen business school will guide you through session 2 and 3. here, i would like to let you know that both session 2 and 3 are conducted using chatham house rule. the keynote speech will be given by william r. white from c. d. howe institute in toronto. he will give you some food for thought about " what is macroprudential policy not? " i am looking forward to an interesting day with some juicy discussions. page 4 of 5 i now leave the stage to the first speaker francesco mazzaferro, head of the european systemic risk board secretariat. page 5 of 5

speech by governor lars rohde at the macroprudential policy conference in copenhagen 2018 19 november 2018 check against delivery dear guests, i am very pleased to welcome you to this macroprudential policy conference in copenhagen. the conference is a result of our excellent cooperation with the european department at the imf and the center for financial frictions at copenhagen business school. the ambition for today is to have an open debate about the merits and limitations of macroprudential policy. and to discuss current challenges and the way forward. to me, the essence of where we stand today with macroprudential policy is best captured in a quote by the danish philosopher søren kierkegaard : " life can only be understood backwards ; but it must be lived forwards. " * * * so let me start with the beginning. 10 years ago, the financial crisis demonstrated that financial risks can potentially affect both the financial system and the real economy. it also underlined that financial crises are expensive and affect the welfare of citizens. the lesson was that we need to ensure that the financial system can serve the real economy in good and in bad times. there was a clear need for better and more comprehensive regulation. as a result, macroprudential policy moved up on the political and academic agenda. the idea being that dosed correctly, prudential measures could reduce the likelihood and costs of financial crises. in my view, there are three important things we have to focus on to reduce the likelihood and costs of a financial crisis in the future : page 1 of 5 1. it is important that the incentives in the banking sector reflect those of any other private company. 2. it is important to limit procyclical behaviour of borrowers and lenders. 3. it is important to build strength in good times to overcome bad times. let me elaborate. * * * first, on getting the incentives right. one important lesson from the financial crisis is that bail - out creates the wrong incentives for banks. we need to break with the old model where profits are privatised and losses are socialised. to avoid excessive risk taking by shareholders, creditors and management, all banks must be able to fail. therefore, in my view, the most important eu initiative since the crisis has been the bank recovery and resolution directive. the purpose of credible resolution plans is to ensure that all credit institutions can be resolved – without the use of taxpayer funds and without distressing the economy. the directive paves