solvency i. fair - value accounting under solvency ii would probably lead to even worse results. it is therefore important to configure the transition to solvency ii in a way which is compatible with stability. banks under pressure when it comes to germany ’ s banks, part of the job of this year ’ s financial stability review is to look at the credit risks which confront us at the present time. to an extent, these risks reflect back on credit policies pursued in the past, such as in ship finance and securitisations. we also direct our attention to the future. for example, a constant watch needs to be kept on the business cycle, since a recession, for instance, would obviously have an impact on banks. it is particularly important to us that loans for german residential property do not turn into a new source of conflagration. a model calculation reveals risks in the event of another severe recession in germany comparable to the one in 2009. the calculation covered the years 2013 to 2015. it is mainly the 12 major german banks with an international focus which would be affected by this simulated economic downturn. they would be faced in particular with value adjustments and write - downs. compared with the baseline scenario, operating earnings would drop by almost €15 billion for 2014 and by over €5 billion for 2015. by way of comparison : in 2012, the banks in question recorded combined operating income of €11 billion. thus, this recession scenario would bring the threat of losses, at least if the banks did not succeed in reducing their costs accordingly. to be clear : this is a model calculation. it is not a stress test aimed at establishing recapitalization requirements, and has nothing to do with the forthcoming eba and ecb stress test. i can only recommend to germany ’ s banks that they review their options for reducing risk and for building up capital resources and put these options into practice where necessary – and the sooner the better. default risks for banks could arise in the medium term from mortgage lending. however, there appears to me to be a distinct public awareness in germany that a spiral of rising property prices, lax lending standards and continued strong lending would undeniably lead to problems. i believe the bundesbank has played its part in creating this awareness, for instance through articles in last year ’ s financial stability review and in the current october monthly report. we have also taken a look at the german housing market this year. in seven major cities – berlin,

the maturity and the currency of loans may be. i greatly appreciate the fact that the institute of international finance actively buttresses efforts to bring about greater transparency among creditors. after all, this also implies a certain extra workload on creditor banks. but the responsibility for crisis prevention naturally rests on both sides - on the multilateral organisations and the private financial institutions alike. and if a crisis does erupt despite all the efforts at prevention, it can mostly only be overcome if private investors, too, pull their weight - pull their weight, that is, in a spirit of enlightened self - interest. charles dallara was therefore undoubtedly right when he wrote : “ in this era of globalization, both market participants and multilateral institutions have crucial roles to play ; the more they understand each other, the greater the prospects for better - functioning markets and financial stability. ” of course, both sides have their own rules and responsibilities. but they have their common interests and responsibilities too. in the market - based financial world of today and tomorrow multilateral institutions can only play a limited role. bailing out the private investors would not only be beyond the limits of the available reserves ; it would - and this is even more important undermine the proper functioning of the private markets. i am happy to mention that the iif - members seem to share this view.