banking sector to benefit again from an economic upturn. this hadn ’ t been possible if the new requirements had come into force with immediate effect. second, although the bar will be raised for all banking activities, the new regulation is primarily targeted at the riskiest activities. systemically important banks, trading assets, complex securitizations, those are the type of banks and activities that will be experiencing the highest impact. those are the activities that will become least appealing to banks. not the traditional, plain vanilla banking business, which includes msme lending. and third, i believe that all new regulation explicitly allows for a proportionate implementation. this means that emerging market economies are permitted to use a risk - based approach with respect to the tasks of the supervisor and the standards that they impose on banks. even in the latest eu legislation, proposals have been made to ensure that capital requirements for msme financing do not grow as rapidly as those for other banking activities. i find it encouraging to learn that the basel committee on banking supervision, starting even this year, will develop guidance on how to apply such a proportionality principle. for emerging markets this guidance is most welcome. so altogether i think that intensified regulation, provided it is implemented proportionately, can continue to go hand in hand with sufficient msme financing. in the end, sounder and healthier banks will enhance financial stability. this, in turn, will benefit the entire financial sector, and hence also the msme business. if you ask me if i think that intensifying regulation will solve all of the problems? no, it definitely won ’ t, i ’ m afraid! if only, because intensifying regulation does not necessarily motivate the banking sector to move back towards its core task of servicing the real economy and its customers. take, for example, proprietary trading. this is when a bank trades financial instruments with its own money instead of its customers ’ money, sometimes even following an investment strategy it doesn ’ t advise to its customers. as a result, the bank makes a profit for itself instead of for the customers. such a disconnect between the interest of the bank and that of the customer still occurs too often. “ survey on the access to finance of small and medium - sized enterprises ( smes ) in the euro area ”, 2 november 2012. bis central bankers ’ speeches ultimately, going back towards their core task of servicing the real economy and its participants is where the future of banking lies. no

bank will survive that does not set its clients ’ interests center stage, instead of sales targets or profits. i find it encouraging to learn that in many emerging markets clients are still put first. this most likely explains in part why the banking sectors in many emerging market economies have weathered the financial storm much better than in developed economies. other factors that have contributed to their stability is that many banks in emerging market economies still engage predominantly in plain vanilla banking activities …. … and that they are strongly funded by wholesale funding. furthermore, i find it encouraging that banks in emerging market economies have remained stable despite the fact that they have used quite innovative ways of banking. many emerging markets use ict solutions that are very advanced. such as mobile banking, which allows individuals and msmes to access and transfer money without needing to travel to a branch. your own country, governor velarde, may serve as a fine example here. in your country branchless banking may have been borne out of necessity. but in recent years, this has proved to facilitate access to finance for great many msmes. you have also shown that regulation, even if intensified, can be designed to accommodate these innovative ways of banking while still protecting customers and safeguarding financial stability. customer protection in your country is even set as a top priority. it calls for banks to formally assess the financial situation of the client in order to avoid over - indebtedness. such initiatives have vastly helped to establish a solid msme business and sustainable growth in your country. i am therefore quite confident that also in developed countries, we shall manage to combine intensified regulation with sound msme financing. and that we shall also manage to ultimately motivate our banks to move back towards their core task of servicing the real economy and their customers. ladies and gentlemen, let me conclude. today ’ s conference coincides with the opening of the dutch national money week, later today. during this week, we teach our youngsters how to deal with money in a responsible way. for today ’ s youngsters create the demand for financial products and services of tomorrow. and many of them will become entrepreneurs, setting up msmes themselves. by educating young people in money matters, i hope we can empower them to shape the banking sector to their liking and to their demands, instead of merely enabling them to use what banks have to offer. i thank you all for your attention, and i wish to you all a very interesting and fruitful conference. bis central bankers ’ speeches