wrong, they would not be rescued at taxpayers ’ expense. thus, the separation could protect depositors and, at the same time, would reduce moral hazard as it would become more difficult to finance risky areas of business through insured deposits. in addition, the separation of business areas could simplify group structures, thereby counteracting incentive and information problems which increase disproportionately with the size of banks. this would make banks more transparent and easier to manage, benefiting supervisory boards and management as well as supervisory authorities. however, separating banking functions will not prevent future banking crises. remember that, during the financial crisis, governments had to save many specialised banks in order to bis central bankers ’ speeches prevent systemic disruptions. the lehman bankruptcy caused precisely such contagion, but not because customer deposits were at risk. rather, it had many connections to other financial institutions including, above all, many counterparties in derivative transactions. essentially the same applied to aig which was not even a bank at all, but an insurer. even if there were a clean organisational separation, the interconnectedness of the financial sector and the resulting systemic importance of individual institutions would not be entirely eliminated. economic linkages would remain. financial institutions are linked not only through direct business relationships, but also indirectly through payment and securities settlement systems. it is also difficult to decide how and where to draw the line between “ good ” and “ not so good ”. the boundaries between customer business, hedging transactions, market making and proprietary trading are very much fluid. and problems in drawing clear boundaries generally result in loopholes and incentives for regulatory arbitrage. we should not neglect the danger of transactions and risks being shifted from the banking sector to areas which are less closely monitored and regulated, such as, for example, the transfer of proprietary trading to hedge funds. all in all, i do not see a clear case for separating banking functions. in other words, i do not believe this to be the first - best solution. 2. 2 introducing credible resolution regimes given these difficulties, what else can be done to end too big to fail? for me, rather than intervening in financial institutions ’ business structures, the preferable regulatory solution is the credible threat of an orderly market exit. and the decisive factor here, as always when it comes to money and finances, is credibility. only the credible threat that even systemically important financial institutions may exit the market, and that this can be executed in an

, we must also pay attention to the cumulative effects of, and the interplay between, individual regulatory initiatives. where there is a lack of consistency there is a danger that different measures may create conflicting incentives or may even cause countervailing effects. this then may diminish, or even completely prevent, the desired effects of new rules. take, for example, the interplay between the capital requirements directive / capital requirements regulation, which serve to implement the basel iii rules in europe, and solvency ii : the former seeks, among other things, to place bank funding on a more stable, long - term basis. however, solvency ii may, under certain circumstances, benefit short - dated bonds, impacting insurers ’ asset allocation and thus banks ’ funding costs. 4. implementing basel iii ensuring consistency clearly calls for intensive cross - border cooperation. this holds especially true as the reform process is shifting from policy development to implementation. countries must live up to their commitments and ensure the timely and globally consistent implementation of agreed policies. this applies, above all, to basel iii, which is without doubt the central achievement of our reform efforts. although it has become apparent that some countries are having difficulties sticking to the timetable, i urge all authorities involved to implement the framework as internationally agreed. recently, there has been a somewhat disconcerting discussion about the perceived shortcomings of basel iii. some argue that it is not enough. others argue that it is too complex. yet, neither of these criticisms is convincing. first, one clear lesson from the crisis is that banks ’ risk absorbing capacity was way too low. therefore, basel iii substantially raises capital requirements, reducing the probability of bank failures and the associated risks to financial stability and to taxpayers. second, while risk measurement will never be perfect, simplicity can sometimes come at a cost, too. operating exclusively on a simple non - risk - based ratio may counteract one of the basel framework ’ s overarching principles : more risk - taking means higher capital requirements. having said this, i fully agree to the leverage ratio ’ s overall intention which is to deliver a simple, transparent and credible ratio, complementing the risk - based capital requirements – and not replacing them. it should just serve as a backstop. there is no alternative to implementing basel iii on a global scale. in particular, i call on my colleagues in the us not to unexpectedly question the whole framework in the 11th hour – after taking part in its negotiation during the entire