openness and willingness to share information. but there are limits to what supervision can do. we cannot supervise everything, even if we want to. do we have to double our number of supervisors, or triple them? will that be enough? and we have to realise that more supervision and rules also creates a moral hazard problem, because we take away the incentive for institutions and clients to take their own responsibility and use common sense when engaging in financial products. a good example of this is the deposit guarantee scheme. if one would keep on increasing the guarantee level, clients eventually become less alert and institutions might lower liquidity buffers. both dangerous developments. it is therefore that i would like to stress today the fact that market participants have to recognize their own responsibilities too, and act more according to them. this applies to institutional managers, traders, fund managers, accountants, and even customers. more than ever before should all market participants consider the consequences of their actions and continuously ask oneself questions about everything one does. in answering such questions i think that a prudent attitude must be taken and greater awareness of one ’ s social responsibility, and ask one every time whether the right thing has been done and whether the actions are not harmful to vulnerable parties. i think that an important step in the awareness of one ’ s own responsibility is aiming for greater openness. transparency is really something that should be improved. because only when customers really understand financial products ; or when the public understands compensation decisions, or bank managers and supervisors really know which risks an institution is subject to, will trust in the sector be restored. in the end, we may not forget that the financial sector is above all a services sector and this requires a great deal of responsibility and care from the side of all. i would therefore very much invite you to help in bringing greater openness and social responsibility to the financial sector. i hope that i have been able to convince you that there is truly a need for change in the financial sector. not only in terms of regulatory practices but also in terms of attitude and culture. i therefore welcome every initiative from the sector in order to achieve this and i look very much forward to a fruitful debate.

found it increasingly difficult to assess which risks financial institutions where subject to, and institutions had more difficulty with valuing their products. transparency was gone, which not only contributed to the lack of trust between financial institutions, but also between client and institution. you will therefore understand that we, as supervisors, had to act quickly and act decisively. as chairman of the basel committee, let me mention some of the measures that the committee proposes. and i would also like to use this opportunity to convince you that these measures are really necessary. despite being a significant improvement over the previous accord, basel ii has shown to still contain some significant weaknesses and shortcomings. of many of these we were aware, but we were not able to adequately address them. however, now, under the pressure from the crisis, many of these issues are open for debate again. let me talk about some of these measures in more detail. first, we are going to improve the level and quality of capital. we have seen during the crisis that the current levels are not adequate and that in the end it is only the capital of the highest quality that counts in adverse conditions. an extension of this measure is that we will make capital requirements less cyclical, by means of additional capital buffers that are built up during economic upswings. this might imply that less profit can be used to pay out dividends or bonuses, as it is instead used for increasing the firm ’ s capital buffers. second, we want to make sure that we really cover all risks and allocate adequate capital to each. a key aspect of this is to prevent regulatory arbitrage opportunities, particularly with securitizations and between banking activities and trading activities. third, we will work on an international accord on liquidity buffers and supervision, instead of the current fragmented, national rules. furthermore, the basel committee proposes to supplement these risk - based measures with a non risk - based measure that acts as a backstop in order to prevent an excessive build - up of leverage during favourable economic periods. the design of the leverage ratio as a simple, transparent, and supplementary measure of capital that is based on gross exposures, will therefore serve as a safeguard against attempts to game the risk - based requirements and address model risk and measurement error. by the end of 2010 we hope to have fully calibrated these measures such that they can be phased in as economic conditions improve, with the aim of implementing them by end - 2012. i