the financial market turmoil has led to an extraordinarily high degree of uncertainty surrounding the outlook for economic growth and medium terms price stability in the euro area, which poses challenges for the formulation of monetary policy. • as a result of increased uncertainty and the changing environment, the ecb cannot longer rely on some of the liquidity management tools and procedures that had previously served it well in order to implement in the money market the monetary policy stance decided by the governing council. • besides, increased counterparty credit risk and developments in the financial system have impaired the functioning of the money market, which represents the first step of the monetary policy transmission mechanism. along these lines, let me explain how central banks have responded to the challenges arising from market turmoil using a combination of operational measures and increased international co - operation. main challenges to central banks in general, public policy responses to the financial market turmoil and the ensuing problems for the banking systems have focused on addressing three key sources of concern : market liquidity, funding and solvency. as earlier mentioned, these three dimensions of the turmoil are not entirely disjointed. indeed, the current turmoil has brought to the fore the enhanced interaction between market liquidity and funding liquidity of individual institutions, partly reflecting the trend among large global banks towards greater reliance on wholesale market sources for funding as opposed to retail deposits. in addition, the experience of some financial institutions in recent months has shown that protracted illiquidity may weaken the balance sheets of institutions and in extreme cases put their solvency at risk. against this background, central bank interventions have aimed to address funding liquidity shortages by supporting market liquidity. in doing so, they have contributed to preventing insolvencies. of course, this does not mean that central banks have targeted individual counterparty solvency concerns, which is of course a task which falls within the reach and responsibilities of governments rather than central banks. policy responses from central banks the responses have varied across central banks depending on the conditions of domestic money and credit markets as well as on their specific institutional frameworks. however, in general, the responses from central banks have mostly consisted of the following categories of interventions : • active liquidity management : central banks have acted to keep short - term money market rates in line with their policy rates ( or targets ) through more active reserve management, thereby flexibly responding to shifts in the demand for reserves. • enhanced liquidity provision : central banks have sought to ease pressures in broader funding markets through

financial stability and minimise the additional regulatory work as a result of harmonisation. this standard will help put credit institutions ’ capital base on a sound and sustainable footing and thus instil further confidence in the banking sector. this latter point, especially, should be of particular interest to credit institutions. but let me make one thing perfectly clear : we know full well that regulation is always a burden. and that is why institutions are also within their rights to call for a stop. 1 / 3 bis central bankers'speeches the good news isn ’ t new at all : the end is in sight. that means that the banking representatives here this evening will very soon have planning certainty for the remainder of the regulatory agenda. and the supervisors among us should also turn our attention to new developments. in the basel committee on banking supervision, we have already started looking to new vistas – amongst other initiatives, we have been evaluating the efficiency of standards and taking a look at digital risks. but let me say one more thing about basel iii : in this debate, it is important to have a clear view of the facts. the basel iii monitoring exercises and quantitative impact studies have given us a robust and granular overview. and judging by the facts we now have, i must concede that the figures thrown around in the debate surrounding basel iii and the demands which these numbers were used to justify did take me aback at times. you see, our impact studies found the increase in capital requirements to be measured, on average. the areas where requirements have risen show just how risk - sensitive the reforms are : we are seeing increases in the capital required in areas which are more at risk – equity interests, for instance. and at the same time, there are credit institutions which take on less risk, so naturally their capital requirements will be lower going forward. so in my view, everything suggests that seamless implementation of basel iii is the way forward – besides the global pledge given by bundesbank president jens weidmann, let ’ s not forget our duty to preserve financial stability. european implementation of the basel regime represents an opportunity to take factors unique to europe and germany on board. this is something for european and german legislators to decide. the european commission and the german federal government give bafin and the bundesbank an opportunity to inform their thinking, and we encourage them to stick to the standards. i am a fervent supporter of basel - compliant and risk - sensitive implementation of the reform package finalising basel iii.