hazard. thus, if a higher input of borrowed capital is cheaper for the bank, this is only because the costs of this are payable elsewhere. conversely, the business costs of higher capital requirements are offset by relief elsewhere, namely for the taxpayer. and we should not forget the positive effects that larger capital buffers have for financial stability, which i have already described. from an individual perspective, one can, of course, well understand that bankers are resistant to higher capital requirements. but from an overall economic perspective, we have to consider negative externalities for society as a whole. 5. conclusion ladies and gentlemen, there is a close relationship between the state and the banks due to implicit guarantees. this is not in line with the core principles of a market economy. these guarantees are threatening to destroy the close connection between risk - taking and liability and have created wrong incentives for the risk - taking behaviour of banks. thereby the social costs of a failure of a big bank have increased. given these high costs, a bail - out seemed ultimately inevitable. to overcome this situation, we need well - designed and credible bail - in procedures. the practicability of resolution regimes requires coordination under the institutional setting as foreseen by the single resolution mechanism. and we have to reduce the overall costs of a failure. without reducing these costs, any bail - in procedure would lack credibility. high capital buffers would reduce the overall costs of letting a systemically important bank fail. hence, practicable bail - in procedures and higher capital buffers are two sides of the same coin. if we follow this approach in real life, we have the opportunity to make important headway towards redrawing the lines between the public and the financial sectors, between the state and banks. and thus we also have the opportunity to restore confidence in our banking sector, our public sector and in our economic market system as a whole in the spirit of those who advocated our social market economic system so brilliantly, in the spirit of ludwig erhard and the founding fathers of the social market economy. let me sum up : • first, blurring the lines between the state and banks threatens to destroy the unity of risk - taking and liability. • second, redrawing those lines calls for credible and practicable bail - in procedures. • third, for these procedures to be credible, the overall costs of a failure have to be reduced through higher capital buffers. • fourth, the state is not a good banker and should

ontario and private providers, given the climate of low nominal interest rates and the presence of large pension funds that are searching for these kinds of investment opportunities. of course, the most efficient and timely allocation of resources for infrastructure occurs when the incentives are right. and it is true that the hardest incentive to get right is proper pricing. a lack of pricing that appropriately reflects demand and supply conditions may be one reason why there have been relatively few ppp infrastructure projects in canada. but new technologies provide new opportunities to gauge demand for public services, and to price them accordingly. clearly, though, if public - private partnerships are to deliver on their promise, it is essential that the risks be appropriately shared between governments and the private provider. and i do recognize that constructing appropriate risk - sharing arrangements is not easy. conclusion let me conclude. i have set out the bank's projections for a strong global economy, although nearterm weakness in the u. s. economy will lead to some slowing in ontario. but this slowing should not be prolonged. the real challenge for policy - makers is to address the long - term structural issues facing ontario's economy. today, i've stressed the importance of human resources development and infrastructure. but i know there are other crucial issues to discuss. so let me now turn it back over to you, so i can take your questions and hear your comments.