and lenders have a duty not to ignore this risk. in the current environment, banks should exercise particular caution when granting property loans. the bundesbank will fulfil its responsibilities. we will continue to closely monitor the real estate market, mortgage lending and the banks granting these loans and take action as soon as necessary. thank you very much. bis central bankers ’ speeches

the financial services marketplace - should not be abandoned without careful consideration by the congress. in the board ’ s view, legislation concerning the payment of interest on demand deposits or de novo branching is unlikely to provide an appropriate vehicle for the thorough consideration of the consequences of altering these key principles. conclusion i appreciate the opportunity to discuss the board ’ s legislative suggestions and priorities concerning regulatory relief. the board would be pleased to work with the subcommittee, the full committee, and their staffs as you move forward in developing and considering regulatory relief legislation. appendix : regulatory relief proposals supported by the board of governors of the federal reserve system1 1. authorize the federal reserve to pay interest on balances held at reserve banks * amendment gives the federal reserve explicit authority to pay interest on balances held by depository institutions at the federal reserve banks. items identified with an asterisk ( * ) were included in h. r. 1375, the financial services regulatory relief act of 2004, as passed by the house of representatives. 2. grant the board additional flexibility in establishing reserve requirements * amendment provides the federal reserve with greater flexibility to set the ratio of reserves that a depository institution must maintain against its transaction accounts below the current ranges established by the monetary control act of 1980. 3. authorize depository institutions to pay interest on demand deposits * amendment repeals the provisions in current law that prohibit depository institutions from paying interest on demand deposits. if adopted, the amendment would allow all depository institutions that have the authority to offer demand deposits to pay interest on those deposits. 4. ease restrictions on interstate branching and mergers in a competitively equitable manner amendment affirmatively authorizes national and state banks to open de novo branches on an interstate basis. currently, banks may establish de novo branches in a new state only if the state has affirmatively authorized de novo branching. this existing limitation places banks at a disadvantage to federal savings associations, which currently have the ability to branch de novo on an interstate basis. the amendment also would remove a parallel provision that allows states to impose a minimum requirement on the age of banks that are acquired by an out - of - state banking organization. the amendment would not allow industrial loan companies ( ilcs ) that operate under a special exemption in federal law from opening de novo branches on a nationwide basis. the corporate owners of these ilcs are not subject to the type of consolidated supervision and activities restrictions that generally apply to the corporate owners of other banks insured by the federal deposit insurance corporation