banking supervision is now carried out by the single supervisory mechanism, composed of the ecb and the national competent authorities. this has unified the basis on which supervision is carried out. the largest and most significant banks are now supervised directly from frankfurt, in close partnership with the national authorities. the euro area has also set up the single resolution mechanism to ensure the orderly resolution of failing banks, while at the same time reducing the impact on the taxpayer. conclusion this account of how policymakers and researchers have interacted in the past ten years shows 5 / 7 bis central bankers'speeches how indebted the former are to the latter. from my point of view, one can draw five lessons for policymakers. first, sudden shocks often make visible the flaws in our policy frameworks and challenge the explanatory power of existing theories in ways that have been previously overlooked. but analysis conducted by researchers and embraced by policymakers remains essential in designing the policy response. second, a policy response that has its foundation in rigorous research is less prone to being impaired by political compromise and easier to explain to the general public. third, keynes is often quoted as saying, “ when the facts change, i change my mind. what do you do, sir? ” well, for policymakers, it is not that simple, and research helps us to decide whether a change in the facts deserves a policy response or, as we say, we should look through it. fourth, when the world changes as it did ten years ago, policies, especially monetary policy, need to be adjusted. such an adjustment, never easy, requires unprejudiced, honest assessment of the new realities with clear eyes, unencumbered by the defence of previously held paradigms that have lost any explanatory power. fifth, we must be aware of the gaps that still remain in our knowledge. our mainstream macroeconomic models still have little to say, for instance, about the non - linear propagation of shocks, the distributional impacts of policies, or how endogenous firm entry and exit can affect economic performance. 15 policy actions undertaken in the last ten years in monetary policy and in regulation and supervision have made the world more resilient. but we should continue preparing for new challenges. the changes that we have discussed, profound as they are, often hinge on one fundamental idea. a natural question to ask is whether such an idea sprang out as a response to a specific policy problem or was rather conceived previously in

in contrast, non - banks would argue that common regulatory standards should apply to all relevant service providers in order to ensure a competitive level playing - field. in the end, the question is whether the approach to regulation should be based on functions or institutions. finally, the globalisation of finance has resulted in the expansion of cross - border financial linkages. an implication of globalisation is that financial distress is more likely to have farreaching cross - border effects. this is a natural consequence of the tighter cross - border linkages that have formed. such effects are almost guaranteed if distress were to involve one of the global players that operate across so many countries and underpin the smooth performance of so many markets. in fact, over 30 years ago, even the failure of a small bank active in fx transactions was sufficient to have significant cross - border ramifications – so significant as to act as a catalyst for the establishment of the basel committee on banking supervision. the knock - on effects of distress at one of the current large global players would presumably be much bigger. conclusions let me briefly conclude, ladies and gentlemen. central banking and payment systems are inextricably linked. central banks all around the world are involved in payment systems and market infrastructures in many different ways owing to their roles and responsibilities in relation to monetary policy and financial stability. indeed, payment systems disruptions would not only affect financial stability, but may potentially also have an impact on monetary policy implementation. central banks have found ways of safeguarding price stability, while at the same time ensuring the smooth functioning of the payment system, by drawing a clear line between providing intraday liquidity for payment system purposes and providing credit for monetary policy implementation. moreover, the sufficient availability of collateral is important today as a contribution of central banks to financial stability. the roles of central banks in the field of payment systems are changing in a number of ways as a result of progressing globalisation, increasing complexity, and the emergence of new players and services : • the approach of central banks to analysing financial stability is changing. a comprehensive view of the key sources of risk and vulnerabilities facing the payment systems and market infrastructures cannot be formed without taking due account of developments at the global level, such as the emergence of cross - border payment systems and offshore centres. issues and questions relating to the location of payment systems and market infrastructures are also gaining in importance for central banks. • central banks have started interacting and cooperating with new interlo