the issues that are relevant from a global financial stability perspective. on the speaker : mario draghi, governor of the banca d ’ italia, has been chairing the fsf in a personal capacity since april 2006. this position – together with the economic and international expertise he has gained during his career – makes him an excellent speaker in current times, given the backdrop of the financial market turbulence. mario draghi graduated from the university of rome, received his ph. d. in economics from the massachusetts institute of technology, and subsequently served as professor of economics at the university of florence from 1981 to 1991. prior to taking the helm at the banca d ’ italia, he was vice - chairman and managing director of goldman sachs and a member of the firm - wide management committee ( 2002 - 2005 ). he was director general of the italian treasury ( 1991 - 2001 ), chairman of the european economic and financial committee, a member of the g7 deputies, and chairman of oecd working party 3. finally, from 1984 to 1990, he was an executive director of the world bank. a few weeks ago, during the annual central bankers ’ meeting in jackson hole, mario delivered a speech entitled “ the current crisis and beyond ”. in his speech, he pointed out three elements that mark the cornerstones of the work plan of the fsf for the month ahead. more precisely, he talked about the need to look more closely at the incentives for appropriate risk control frameworks, efforts to improve the resilience of the financial system to shocks frameworks for dampening the cyclicality of risk - taking. not only was it a pleasure to listen to him, i also fully endorse the proposals he made. the title of his speech today is “ restoring stability in the financial system ”, a topic that is evidently highly relevant and of interest to all of us. mario, i am looking forward to your insights during the fifth bundesbank lecture. the floor is yours.

fixed effects. standard errors, which are clustered at the country level, are reported in parentheses. the results are robust under different specifications, including using a set of bank - specific control variables ( total assets, z - score, cost - to - income ratio, efficiency ratio, total debt, total liabilities, total gross loans ) and country - specific gdp growth. this association is there even as the set of control variables in the regression is varied. the association is also persistent : the coefficient on the reforms lagged by one year is similar in magnitude and statistical significance. the association is also economically significant. a reform that increases the index in a given year is associated with a 1. 3 percentage point reduction in the rate non - performing loans and a 0. 97 percentage point reduction in the subsequent year, all else equal. these results are consistent with what other papers have found. dincer and eichengreen ( 2012 ) find that lower non - performing loans relative to gdp in countries in which the supervisor is independent of the government. klomp and de haan ( 2009 ) find a negative association between a measure of financial instability and the degree of central bank independence. there is also evidence that supervisors that are probably more independent of the banks they supervise tend to be more robust. for instance, agarwal et al ( 2014 ) finds in the united states federal regulators are twice as likely to downgrade banks ’ supervisory ratings as state regulators. ben - david et al ( 2018 ) analyse the impact of supervisory responsibility for large banks moving from national regulators to the ecb ’ s single supervisory mechanism or ssm. they find banks for whom the ssm became their supervisor sought to manipulate their balance sheets to fall below the thresholds for being in scope of the ssm, suggesting banks anticipated that the ssm would be a tougher supervisor. i would like to thank matthew willison, hugh burns, nicolo fraccaroli and david swallow for their assistance in preparing these remarks the results in table 3 mean that when countries implemented reforms that increased the independence of their prudential regulator and / or supervisor, non - performing loans as a proportion of total lending decreased. greater regulatory independence increased financial stability. but did greater regulatory independence come at a price of less efficient banks or slower credit growth, a version of what is sometime referred to “ as the stability of the graveyard ”? it seems that it did not – see table 4. first, the authors replaced the non - performing