great deal to contain the crisis, and have assumed considerable risks : not just financial risks but risks to their credibility and independence. the bundesbank has repeatedly emphasised what needs to be done. at the european level, it is necessary to strengthen and improve the framework of monetary union. a key premise here is that an adequate balance must be maintained between liability and control. whoever ultimately assumes responsibility for risks, be they in government budgets or in banks ’ balance sheets, must also be able to control and exercise influence on the build - up of risks. greater mutualisation must not go hand - in - hand with weak rights of intervention and controls. if that were to happen, the consequences of the political mistakes made by individual member states could easily be passed on to all the others. that would not result in a stable framework for monetary union, however. and where there is no stable framework, crises are pretty well inevitable. bis central bankers ’ speeches at present i do not see a political majority for either of the two possible solutions – be it the path to a bona fide fiscal union or the way back to the maastricht treaties. many member states are unwilling to renounce much more sovereignty, and the mutualisation of risks that has been put in place so far can only be reversed with great difficulty. however, work on the institutional framework of monetary union has not come to a complete standstill. 3. banking union the establishment of a european banking union has been the subject of intense debate since the middle of this year. the term “ banking union ” refers to the creation of a single european system of banking supervision, a single resolution and restructuring mechanism and a single system of deposit protection. a banking union constitutes a step towards greater integration in europe and – if it is correctly conceived and implemented – it can strengthen the institutional framework that is so important. a single system of banking supervision makes sense given the substantial financial linkages between european institutions. and in tandem with a suitable resolution regime it could reduce the strain on national budgets caused by the restructuring of banks. unlike a national authority, a european supervisory body has no incentive to act out of a false sense of consideration for “ its ” banks. what is more, it can help achieve a level playing field within the euro area and, at best – thanks to the extensive body of data at its disposal – it can better identify risks that threaten the banking system or risks that emanate from it. but setting up an effective, strong european banking

sabine lautenschlager : deutsche bundesbank ’ s 2012 financial stability review – the risks to the german financial system opening statement by ms sabine lautenschlager deputy president of the deutsche bundesbank, at the press conference of the deutsche bundesbank ’ s financial stability review 2012 “ the risks to the german financial system ”, frankfurt am main, 14 november 2012. * 1. * * introduction ladies and gentlemen, dear journalists, dr dombret and i cannot, unfortunately, give the all - clear in presenting this year ’ s financial stability review. like last year, we still see substantial risks for the financial sector. the stillsmouldering sovereign debt crisis continues to shape the risk situation, even though progress has been made at the national and eu level. for this reason, it remains important that governments put structural adjustments in place to fight for their competitiveness and achieve sustainable public finances – with a view to addressing the root causes of the crisis. but risks stem not only from the sovereign debt crisis. the global economic slowdown and market liquidity in search of yield may lead to additional risks in the financial sector. and we are also keeping a very close eye on the challenges that emanate for insurance companies and banks from the low - interest rate environment. dr dombret will come back to that question in greater detail later on. before my colleague and i assail you with selected prices, balance sheet data and indicators, i would like to draw attention to one aspect which is not to be underestimated, and which poses a threat to financial stability in the medium to long term. i am referring to the imminent danger of overtaxing monetary policy in the battle against the sovereign debt crisis. 2. government debt crisis without a doubt, the sovereign debt crisis has revealed weaknesses at the national level and weaknesses at the european level. to remedy these weaknesses is a challenge for european policymakers and national governments alike. and to overcome this challenge, very difficult and unpopular decisions have to be made. of late, the search for solutions has increasingly led to the central banks. i consider this to be a dangerous route to take. monetary policy cannot eliminate the causes of the crisis ; nor can it, therefore, lead to the desired objective. the monetary policy measures that are implemented can only buy time. there is a general consensus on this within the eurosystem. nor is this time for free – it comes at a price. the central banks have already done a