only a symptom of the underlying problem. in fact, there is a deeper dimension which i will refer to as a second dimension of the crisis, the “ crisis of the social contract ”. the latter reflects a fundamental misalignment between the economic status that industrial countries have grown accustomed to and the material conditions that are affordable without a profound shift in economic policies. but in engineering such a shift, a third dimension comes to the fore, namely a crisis of the institutional architecture. as regards this third dimension, i will focus on the european context where policy - makers have to conduct a fundamental overhaul of emu simultaneously with their acute crisis fighting efforts. i will argue that these different crisis dimensions reinforce each other and pose particular challenges for policy - makers, both in designing appropriate policy responses and in communicating them. i will also argue that, in contrast to the former two crisis dimensions, which affect all mature economies, the third dimension is the most specific to the european context. see jay c. shambaugh, “ the euro ’ s three crises ”, brookings papers on economic activity, spring 2012, or the special report of the german council of economic experts, “ after the euro area summit : time to implement long - term solutions ”, july 2012. bis central bankers ’ speeches three dimensions of the crisis debt deleveraging the global deleveraging process will feature prominently in tomorrow ’ s conference programme, so i will restrict myself to a stylised account of the most salient features only. its roots can be found in the pre - crisis period, when economic activity markedly exceeded the sustainable long - term trend. this excess, which was observable in virtually all major industrialised countries, was fuelled by an aggressive accumulation of debt in various sectors of the economy, driven by, inter alia : unchecked financial innovation ; the absence of binding and consistent macro - and micro - prudential policies that could prevent escalating stability risks ; and a failure of financial markets to appropriately sanction failed public policies and unsound business models. as a consequence, ever more consumption was financed by borrowing against future incomes. but instead of systematically reflecting this inter - temporal shift of consumption opportunities in higher real borrowing costs, credit conditions were largely unaffected. mispricing of credit can be protracted, but it exposes the credit market to sudden reversals of sentiment. this occurred when a number of shocks, initially fairly confined to the us financial sector, spread sustainability fears

to enhance supervisory convergence and cooperation, initiative and commitment on the part of the banking groups themselves is indispensable for making progress in the future. i would just recall in this context as an example that adequate group - wide tools and procedures for risk management and the effective dissemination of relevant information within a group are basic prerequisites for streamlined supervisory action. the experience of the cebs consultative panel and public consultations characterised by an active involvement of market participants indicates that there is a strong will on the part of the industry to contribute to the success of the supervisory efforts. conclusions let me briefly conclude. the cebs has made significant progress so far and this has been acknowledged and appreciated by all interested parties, including the ecb and the eurosystem. the work of the cebs has laid the foundation for a supervisory framework in the eu which should be able to promote on the one hand further banking and financial integration and at the same time maintain its effectiveness in pursuing financial stability in a more integrated financial system. the full success of the framework established by the cebs should not be taken for granted. it will depend on the continuous improvement of several factors including further possible progress in the decision - making process of the cebs, a sustained high degree of commitment on the part its members and the necessary constructive role of market participants. thank you very much for your attention.