, transport companies and financers, among others. news spread very fast through this network. after napoleon's defeat at waterloo, the rothschild family received the news – before the british government! they purchased british government bonds, and when news of the victory arrived, prices rose, making the rothschild family even wealthier. at the core of the family's success was the foresight of mayer rothschild, which led him to conclude a partnership agreement with his sons at an early date. this agreement was aimed at ensuring a strong family - owned business based on the father's solid reputation as a businessman. the family was to benefit from the reputation that mayer rothschild had built up. furthermore, mayer and his sons were to share the profits from the business empire, which meant that they took an interest in each other's affairs and the partnership as such. in other words, the business empire was based on the principle of everyone having something at stake. * * * * * * * * * my other retrospective example relates to a period of around 30 years in mid - 19th century usa. before this period, every single bank in the usa had to have a charter through special legislation for that specific bank. however, this changed when many states began to introduce state charters describing the general requirements to be met by banks that wanted a licence to operate. this period has been called the " free banking " era page 2 of 8 because anyone meeting the relevant state's banking requirements could establish a bank. a bank was typically established by selling shares – " subscriptions " – and by using the funds received to purchase government bonds. if you wanted to operate a bank, you had to deposit government bonds to back the banknotes issued by the bank. the banknotes were used by traders, and there were " banknote reporters " who prepared lists of counterfeits and listed the prices of the various banknotes. later generations have interpreted this period in different ways. a number of banks failed, so initially it was investigated whether they misused their special position, e. g. by having insufficient backing for the banknotes issued. in the literature, these banks were referred to as " wildcat banks ". later, the view of the period changed, and focus is now on market discipline during this period. this was reflected in the market's ability to price the risk on the banknotes from the individual banks, which was of paramount importance to the bank's reputation. there were banks that failed, but

while also ensuring that the authorities have the tools required to handle the situation, should the institutions nevertheless become distressed. like other firms, banks can fail without passing the bill to society and its citizens. but the brrd cannot stand alone. there is a need for regulation of financial companies. for example, capital and liquidity requirements must apply. the requirements as to how much capital banks and mortgage banks must hold have evolved considerably over the last 30 - 40 years. seen from today's perspective, starting with basel i, it included very simple rules regarding the capital required if a bank was to lend money. there was a fairly rough breakdown by loan risk, which meant that loans were weighted according to their riskiness. the belief that it was possible to estimate the loss profiles of various customer and loan types, and hence to calculate the capital requirements for unexpected losses on loans, led to basel ii. as we all know, it did not stop there. we now have basel iii, and complexity has increased. fortunately, the capital requirements have also increased. not only capital has been regulated. there are also rules on liquidity, fit and proper rules for management and rules on investor protection now. page 5 of 8 and many more. all these rules and measures address important issues. and they have been necessary because there were insufficient incentives to ensure that the financial sector behaved. we cannot and should not regulate all aspects of the financial sector in detail to prevent things from going wrong. it would simply not be possible to formulate such rules and it would also be virtually impossible to observe them. the banks'managements must have a certain degree of freedom to run their businesses. i am not in favour of further detailed regulation. and perhaps we should consider whether the fence poles are in the right place or whether we have fenced in some areas too much. so i am on the side of simplifying and streamlining rules and regulations if possible. and as i have said, that is possible now because the brrd ensures that irrespective of the size of a bank, we can manage it in a crisis situation. the critical functions will be continued, and investors and creditors will foot the bill – not the taxpayers. in other words, the brrd is a prerequisite to do away with some of the detailed regulation. if we do so, it may give managements and boards more space to actively consider the business model and ethical principles on which their business is to be based. it is