conducted to determine what can really work in practice and is compatible with the incentives of institutions to comply with the rules. also, the alternative route of relying in more disclosure of information by the institutions themselves and of creating the conditions for better market discipline should always be considered. this could be, for instance, the approach to adopt in the case of hedge funds as there seems to exist internationally great reluctance in introducing regulation and supervision in that segment. the arguments for that are based on the idea that public policies are not justified to protect sophisticated investors, but that tends to forget the system - wide role that those institutions now play with possible systemic consequences. more generally, rajan makes the proposal that market institutions should be encouraged to impose the practice of requiring managers to have some of their own wealth invested for several years in the funds they manage. nevertheless, he mentions immediately that : “ this is clearly, again, no panacea – the managers of ltcm did have substantial stakes in their enterprise … ” the idea put forward by charles goodhart ( 2005 ) 12 that capital requirements should be indexed to developments of asset prices ( e. g. regulatory capital for housing credit would increase as property prices rises ) is interesting but would also be of limited effect and would apply only to supervised banks. if the idea of imposing mandatory disclosure of more information by the new non - regulated institutions is not followed, authorities will have to rely on enhanced market discipline through the indirect route of putting more pressure on the supervised entities that provide liquidity and credit lines to the new ‘ investment institutions ’. so, as always, we will have to wait for the system to be tested in order to see if regulations will have to be adjusted again to the new financial structures. let me finalize with some remarks let me address the issue of the role that central banks should have in relation to financial stability, even when they don ’ t have the responsibility for supervision. in the first place, they should improve what they already do in the field of macro - prudential analysis. besides publishing financial stability reports, the authorities normally conduct top - down stress tests to assess the resilience of the system to various shocks. in this context, new progress has to be made to improve the methodologies to model the financial sector and its interaction with the economy. also, more international cooperation in this field of macro - prudential activities would be most welcomed. second, in conducting monetary policy they should not loose sight of financial stability issues, specially in

the act in itself is a step in the right direction since it heightens what the imf, in its last article iv consultation, 10 called the “ level of preparedness ”. the fact that legislative change is also still needed in germany before the key attributes and the eu directive can be fully and consistently implemented does not contradict my – in principle – positive assessment of the restructuring act. 3. 3 rigorous monitoring of the implementation of the new international standard experience over the past few years has shown that international standards can sometimes be futile if they are not implemented and applied in a consistent and timely manner. for this reason, the fsb wants to rigorously monitor the progress made in implementing the key attributes in its member states. what makes this all the more important is the fact that the key attributes take us into unchartered waters. moreover, implementation will require legislative and institutional changes – some of them extensive – in all g20 jurisdictions. last but not least, monitoring of consistent implementation is crucial for overcoming obstacles to cross - border cooperation which will play such an outstanding role. to facilitate the monitoring process, work is currently underway, as a matter of urgency, on an assessment methodology that will make it easier to objectively assess the level of implementation in individual countries. this instrument is to be used by various bodies : a ) countries will be able to perform a self - assessment in order to identify any gaps in implementation ; b ) the imf / the world bank will use this methodology when carrying out their fsap assessments ; c ) the fsb is already planning a first review for 2012 as part of its peer review process, and d ) the fsb peer review council, which has not yet been set up, will apply this instrument to global systemically important financial institutions. countries with a below - average performance in these assessments will be required to provide an explanation, and can expect the results to be published. i believe implementation must be monitored rigorously because the new standard closes a serious gap in the regulatory framework. 4. conclusion this gap illustrates perfectly that the regulatory framework before the financial crisis was not geared to the stability of the financial system as a whole. this failure to take sufficient account of the systemic stability perspective must and will be remedied. for this reason, let me draw your attention to the german government ’ s draft of the financial stability act, which the german cabinet passed yesterday. this act will assign central tasks of macroprudential oversight to the bundesbank