both their short and long - term effects on banks and the real economy. repeated fears have been voiced from within the financial industry that the stricter basel iii regulations combined with the more far - reaching requirements for sifis will have the effect of restricting the credit supply. the basel committee has looked into this question and come to the conclusion that the drawbacks are outweighed by the advantages, namely the gain in stability and the reduced likelihood of future crises. a moderate increase in the cost of lending and minor losses in growth will thus not put at risk the supply of credit to the economy. pressing ahead with work on the various elements of the reform agenda in parallel harbours the risk that individual measures might conflict with each other. in our closely interlinked financial system, focusing on sector - specific measures can easily lead to unintended bis central bankers ’ speeches interactions occurring or even conflicting incentives being set. such a lack of consistency might lessen the desired effects of the new regulations or even negate them entirely. one possible instance of unwanted interactions is the combined effect of european banking regulation and the eu solvency regime for insurers. this is because banking regulation aims to place bank funding on a stable, that is a long - term basis, while, under certain conditions, the solvency regime gives preference to bank bonds with short maturities. capital requirements increase relatively sharply given longer duration of the bank debt securities held by insurance companies – at least when the standard formula is used. the outcome might be that insurers change their asset allocation to the detriment of bank debt securities. as insurers are among the most important investors in bank bonds, this could ultimately lead to an increase in banks ’ funding costs. within a single sector, too, different regulations can set conflicting incentives. one example of this might be the interplay between the eu crisis management directive and the scheduled liquidity ratio requirements. this is because the draft proposals of the directive provide for short - term liabilities being excluded from bail - in, thus setting incentive for short - term funding. this is diametrically opposed to the aim of regulating liquidity, which is to safeguard the maintenance of liquid funds even under unfavourable circumstances and for longer periods of time. of course, a final judgement on the effects of each of the regulatory initiatives can only be made when their precise details are known and as soon as robust empirical evidence is available. in the end, for the regulatory reforms to have their desired

joachim nagel : the bundesbank perspective on the pfandbrief market speech by dr joachim nagel, member of the executive board of the deutsche bundesbank, at the tokyo pfandbrief investor seminar 2011, tokyo, 26 january 2011. * 1. * * welcome ladies and gentlemen first of all, i would like to thank the association of german pfandbrief banks for giving me the opportunity to present the bundesbank perspective on the pfandbrief market to you. the motto of this event, “ the pfandbrief 2011 – return on investment in volatile times ”, suggests what is going on in financial markets. from my point of view as a central banker it is too early to give the all - clear, but nevertheless measures were set in motion to overcome the financial crisis. when the us subprime crisis disrupted the global capital markets in 2007, the european securitisation markets were also affected. that is why the pfandbrief and other covered bonds played a central role in european monetary policy, not only as collateral but also during the covered bond purchasing programme. but first of all, i will comment briefly on the special role of the pfandbrief on the european covered bond market. 2. pfandbrief in comparison with european covered bond products european covered bonds are very heterogeneous. the reasons for this are different legal systems and different market standards or traditions in certain financing segments. though there is a trend towards separate covered bond laws in most european countries, there are significant differences in terms of scope. the german pfandbrief act has the broadest scope and it is the strictest in many areas. for example, there are no derivatives in the underlying and the loan - to - value rules are the most conservative. its simplicity and transparency make the pfandbrief the benchmark for european covered bonds. the cover pool of a pfandbrief is of extraordinary quality, since structured products are excluded and cover assets are separated in the so - called “ cover pool register ”. the cover assets contained in this pool serve first to satisfy the pfandbrief creditors, and in the event of a pfandbrief bank ’ s insolvency do not participate in the insolvency proceedings. in order to engage in pfandbrief business, a specific licence is required demanding that issuers provide evidence of their intention