bringing the entire financial system to its knees. or put differently : no bank should ever become so entangled in the rest of the financial system that its collapse would pull the whole web apart – banks should not be “ too big to fail ”. it is clear that the incentive problems i ’ ve just described would continue to exist if bail - outs were simply to be transferred from the central bank to fiscal policymakers. an example would be rescuing banks using taxpayers ’ money even though resolving them would be the wiser course of action. we cannot have governments providing free insurance, as such an implicit government subsidy makes banks too big and too risky. systemically important banks, in particular, therefore need to play a role in protecting themselves against default by increasing their equity capital and ensuring a minimum total loss - absorbing capacity ( tlac ) for their liabilities. by having banks bear the costs of their own protection, incentives are set for risk - conscious activities. banks simultaneously become more resilient, and the contagion effects are reduced should a bank run into difficulties all the same. we have seen some progress already with regard to equity capital. basel iii significantly strengthened the requirements for both the quantity and the quality of equity capital. however, to date, the binding rules have been based exclusively on risk - weighted capital. the risk weighting is supposed to prevent banks from investing too heavily in high - risk assets. during the financial crisis, however, we found out the hard way that the risk weighting does not always reflect the actual risk of an investment. therefore, in my opinion, a capital regime that is also geared to total assets is absolutely necessary. hence, the leverage ratio is to become part of pillar 1 of basel iii and thus binding from 2018. stricter capital requirements will help to increase the internal capital adequacy of banks. but capital does not come for free. this means that stricter requirements may also reduce the banks ’ readiness to take on any risks at all ; that is, to lend. but that would slow economic momentum. ultimately, this is also a balancing act. however, it seems clear that additional efforts to expand banks ’ capital base would be advisable, especially for systemically important banks and those that will just barely meet the basel iii requirements. but even stricter capital requirements cannot entirely prevent individual banks from collapsing. and this is okay. after all, the possibility of failure is essential in a market economy. this is why functioning resolution regimes are

these topics. the large number of distinguished speakers ( also at today ’ s conference ), the large number of interested participants and the wide press coverage tell me that i do not need to elaborate further on the relevance of these issues for european monetary policy. i would, rather, like to stress another facet : eight annual ecb watcher conferences also mean eight consecutive appearances of otmar issing at this event. therefore, i would like to take a closer look at otmar's role in these conferences. otmar issing ’ s role from the very beginning, the history of the ecb watcher conference has been inextricably linked to otmar issing. firstly, because i organised the first conference in 1999 in close cooperation with him. secondly, because he has participated in every conference since it was established, providing explanations, comments, replies, opening or concluding remarks. a pretty good track record! throughout all the years as the ecb ’ s chief economist, otmar issing has always stressed the importance of communication and transparency for an effective monetary policy. his annual participation in the watcher conferences shows just how rigorously he personally sticks to these two principles. his unbroken participation is a concrete example of central bank transparency and communication policy in action. it also reflects otmar issing ’ s general open - mindedness towards sceptics and outright critics alike. as an example, let me briefly recall the controversial issue about whether or not the eurosystem should use its two - pillar - strategy for conducting monetary policy, or, more generally speaking, whether or not monetary aggregates should play a prominent role in monetary policy, a question of ongoing relevance. in this context, substantial criticism has been voiced in recent years – not least during previous watcher conferences. nevertheless, otmar issing always chose to face his critics directly at such events in order to patiently and repeatedly explain the whys and wherefores underpinning the eurosystem ’ s current monetary policy strategy. let me conclude my short review with the following, rather personal thoughts regarding otmar issing ’ s legacy. at each of the previous watcher conferences, i was impressed by otmar ’ s mild - mannered, calm style coupled with his resolute attitude. otmar made it a habit to deal personally with each challenge. this commitment and tenacity is probably why he has enjoyed such an outstanding career as one of the few economists who have been exceptionally successful as an academic,