because they were unable to resell loans as planned. furthermore, they were drawn on through liquidity lines to special - purpose vehicles. in this way, risks were transferred back into the banking system. at the same time, the assets taken back on to the books have to be backed by capital. this means that, with the approach of the annual financial statements as well, the banks ’ capital base is coming somewhat more sharply into focus. over the past few years, however, this capital base has improved visibly thanks to large profits and is therefore able to cushion the strains. iii international bodies working at full stretch while we are still held in the grip of the current events in the financial markets and the associated major uncertainties, the international bodies are already working at full stretch on analysing the causes and implications of the distortions in the financial markets. at the centre of these activities stands the financial stability forum. the fsf ’ s function is mainly as a coordinator, whereas many of the specific tasks have to be performed by the member institutions, such as the basel committee on banking supervision and the committee on the global financial system. on behalf of the g7, the fsf has set up a working group chaired by mario draghi. this working group will prepare a comprehensive report for the g7 meeting in spring. this report will contain, above all, an analysis of the shortcomings in the international financial system. on this basis, any need for action can then be identified. the working group ’ s focal points are consistent with the insights which we at the bundesbank have gained so far and have outlined in the stability review as an interim assessment of the financial market turbulence. this concerns four key areas : risk management, accounting, ratings and the regulatory framework – and, therefore, in large part, issues of adequate transparency in the financial system. improving transparency is something in which all the parties involved in the “ originate - to - distribute ” model – originators, arrangers, investors and, not least, the rating agencies – must and, out of benign selfinterest, will play a part. ratings of structured financial products, in particular, are subject to model risks and the risk that assumptions about, say, the development of macroeconomic data or default correlations turn out in retrospect to be unsustainable. the assumptions made should therefore be disclosed. in the necessary evolution of the rating methodology, thought also has to be given to examining how the rating

results will respond to a variation of the assumptions in stress tests and scenario analyses, which should likewise be made transparent. as the risk characteristics of structured financial products differ markedly from those of traditional bonds, it seems to me that, not least, the use of a separate rating scale for structured financial products would be a promising way to help create the necessary transparency. at the same time, however, i would like to warn against exaggerated expectations. the more complex the financial products become, the more difficult it will be to create transparency. but this is where the financial institutions themselves also have a responsibility to make greater transparency possible. a tendency towards simpler financial products could also bring back more light into the financial system. last but not least, at the international level we shall certainly also have to take a good look at the experience of money market management during the financial turbulence. for the bundesbank, i would like to emphasise how much the operational framework as well as the operational capability in the eurosystem proved their effectiveness. in short, we have passed a crucial test but are still faced with challenges.