serbia, as for any other advanced or emerging economy, to pursue sound fiscal policies. as an open economy facing balance of payment challenges, it is crucial that serbia pursues stability - oriented macroeconomic policies that will bring international recognition and put the country in a position to finance domestic and external deficits temporarily, which in turn would smooth its development process. another lesson drawn from the crisis by the eu was that there was a need to review and reinforce the structures for micro and macro - prudential supervision. the result has been the establishment of three pan - european supervisory authorities that have been given powers to promote eu interests in securing financial stability while day - to - day supervisory powers remain at the member state level. on the macro - prudential side, the ecb has been asked to take on challenging new obligations arising from the establishment of the european systemic risk board ( esrb ). the ecb provides the chair of the esrb and its secretariat. while the ecb has for many years raised its voice on financial stability concerns and risks in the euro area, the new esrb must work from an eu - wide perspective and assume the additional role of issuing warnings and recommendations. the authorities responsible for financial stability will either need to comply with those recommendations or explain why they do not wish to do so. we consider this a useful way forward in the absence of the more radical step of a transfer of competencies from the national to the european level. from the point of view of the individual country, including serbia, i would also stress how important it is that the financial stability mandate is clearly allocated and that the central bank plays an important contributory role in this context. we have drawn a number of other conclusions from the financial crisis in europe – including at central bank level. we draw our inspiration from a firm intention to perform our tasks in a better way so as to avoid a repetition of what we have been through over the last couple of years. the implication of this is that, to some extent, the best practices of central banking in the eu are a moving target, since we consider it our duty to remain always at the forefront of developments that will help us to achieve our objectives in the best way possible. from this perspective, today ’ s event should not only be seen as marking the continuation of an already strong partnership between the national bank of serbia and a large number of national central banks in the european union. it should hopefully also highlight a partnership that will continue for many years, even

end to the preferential treatment given to sovereign risk in bank balance sheets. banks ’ substantial exposure to sovereign risk – which even increased in bis central bankers ’ speeches some quarters during the crisis – owed something to the 0 % risk weight for government bonds and the absence of upper limits for lending to governments. putting an end to this practice of privileging sovereign debt over corporate loans would also represent a major step towards making lending to businesses more attractive again. that ’ s not the only regulatory measure that ’ s of decisive importance. higher capital requirements are key to ensuring that banks can withstand greater losses under their own steam, thereby shifting risk back to shareholders. this process got underway with the basel iii regime and now needs to be rigorously implemented. having a mechanism that facilitates the orderly resolution or restructuring of large, international and highly interconnected banks in the event of difficulties – otherwise known as the “ too big to fail ” problem – is equally important in future. progress has been rather mixed so far on the implementation of internationally agreed standards for resolution regimes. role of monetary policy finally, i would like to turn to central banks ’ role in resolving the crisis. the causes of the crisis are structural. this is why only structural measures can resolve the crisis. monetary policy – that is, the eurosystem – has already done a great deal to contain the crisis. the eurosystem has cut key interest rates and it is supplying banks with practically unlimited amounts of liquidity. on top of this, in july ecb president mario draghi provided forward guidance on the ecb ’ s future monetary policy stance, indicating that key interest rates would remain at present or lower levels for the foreseeable future. though the design details of these monetary policy measures are debatable, the action itself was essentially correct. however, the longer the phase of low interest rates continues, the blunter the loose monetary policy instrument becomes ; risks to financial stability increase and the exit becomes more difficult. the eurosystem also intervened in the government bond markets, however, and raised the prospect of further interventions subject to certain conditions. you will be aware that i take a critical view of these steps. for by purchasing government bonds of countries that are finding it difficult to place their bonds in the market, central banks are redistributing the burden of unsound fiscal policy throughout the euro area. ultimately, this is tantamount to mutualising liability for the individual countries ’ debts via the central bank. doing so