simple solutions to complex problems. think about the leverage ratio, for example, which has been promoted as a simple measure to restrict risks. designing a leverage ratio compatible with the different banking systems has been anything but simple ; at the bcbs it took us several years and i would not call the outcome a simple design either. often there was no easy answer available to those negotiating basel iii as we had to cater for the heterogeneity of our markets, market participants and banking systems. as for the future, i believe the basic architecture of basel iii is solid and that it will serve us well for years to come. but it ’ s no secret that the business of banking changes fast. so, it was clear from the start that some parts of any framework might have to be fine - tuned. the same is true with basel iii ’ s complexity. we have to see how the rules work in practice and what impact they 1 / 2 bis central bankers'speeches have. but still, we can reinforce the framework without introducing new rules or reworking its architecture. the next step is now to faithfully implement basel iii around the world. overall, i agree with the idea that we should not try to come up with a new framework every three years. we should rather focus on implementation. but i would not want to give the impression that i am in favour of less regulation. over the decades, we have seen a regulatory and supervisory cycle. the post - crisis phase of this cycle has been characterised by an understandable tendency to strengthen regulation and supervision. this is natural when the memory of the consequences of light - touch regulation is still fresh. however, as the memory of the crisis fades, the cycle usually enters a phase where regulation and strong supervision are perceived as a hindrance to growth and markets. in this phase, regulation leaves less room for supervisory discretion. the requirements for the supervisor to be allowed to act begin getting more stringent. in this phase of the cycle, it is usually harder for regulators and supervisors to react to new risks. my impression is that we are now between these two phases of the cycle. between a phase where strong regulation and supervision are encouraged, and one where there are strong calls for fewer restrictions. this could be risky, and i would strongly advise against weakening rules we have already agreed on. besides this general point, there are several issues which should and could be dealt with, or discussed at the bcbs. work can be done to improve joint understanding of

are. although the liquidity provided by the ecb has increased substantially, this has not led to an increase in monetary and credit aggregates. on the contrary, credit flows remain weak and loan demand has not yet picked up. this will, however, change at some point in the future, so that we are constantly monitoring the situation. again, you could gain an understanding of the dynamics of a pick - up in credit demand and supply via the ecb ’ s balance sheet. if banks increase their lending activities, their reserve requirements would rise. all other things being equal, that would reduce the amount of “ excess liquidity ”, thereby transforming the balance sheet expansion of the ecb into credit and economic growth, both of which entail inflationary risks. from this reasoning it becomes clear that the timing will be crucial for the withdrawal of the enhanced credit support, and that a strategy is needed to guide this process. let me now turn to this topic. 2. 4 phasing out the enhanced credit support there can be no doubt that the ecb ’ s monetary policy currently provides substantial support to the banking sector and the euro area economy as a whole. i would characterise our current monetary policy stance as accommodating, which is appropriate in view of the fact that neither the economic analysis nor the monetary analysis point to risks for price stability at this stage. it is clear, however, that our exceptional support cannot last for too long a period of time since there are negative side effects. • the money market yield curve is currently strongly influenced by the abundant liquidity in the market, i. e. short term money market rates are to some extent distorted. if this situation persists for too long, it may contribute to a misallocation of capital. • there is a clear risk of creating a dependency of banks on central bank refinancing, while the intention of the current policy is only to “ help banks to help themselves ”. it may also slow down necessary structural adjustments to the balance sheets of banks and, ultimately, to the business models of some financial institutions. • risks to price stability will ultimately emerge from having this exceptional support in place for too long a period of time. for all these reasons, the ecb has an exit strategy in place to guide the process of phasing out our enhanced credit support. this strategy can be activated at any time. let me elaborate. consistent with its mandate, the ecb needs to act if risks to price