poses a number of challenges. also, resources that are needed for policy evaluation. evaluations require good data and the labour input of skilled individuals to perform them. facing up to such challenges is unavoidable if the effects of reforms are to be understood. a structured evaluation process is critical to managing them. policy evaluation means being transparent about what policy was intended to do in the first place and what it has achieved. policy evaluations follow procedures that have many similarities with drug tests in medical science. " what are the effects of regulations on the stability of the financial system? " is like asking " how does this drug affect the patient ’ s health? " in either case, the purpose of the question is to find out whether the treatment cures the disease – or merely alleviates the symptoms. besides this, potential side effects can be revealed. a structured evaluation framework allows disentangling the many different factors that may have affected the “ patient ". good evaluations provide answers to three questions : did the reform “ cause ” an outcome? much has changed since the crisis : the competitive environment in which banks find themselves has changed, economic recovery has been slow, and other policies areas such as monetary policy have responded as well. thus, even in the absence of regulatory reforms, banks would be in a different situation now than before the crisis. have the reforms had similar effects across markets or jurisdictions? lessons learned from one market or country may not apply to another. in some countries, ( non - financial ) firms finance the bulk of their investments through capital and debt markets, in others, they rely more heavily on bank credit. legal and institutional settings differ across countries. such differences need to be 4 / 8 bis central bankers'speeches taken into account. have the reforms achieved their overall objectives? ultimately, one needs to look at the benefits of reforms to society as a whole. disentangling the costs and benefits of regulation is the crucial point of any evaluation. financial reforms generate direct compliance costs for market participants, such as the costs of reporting requirements, and these costs tend to be recognised immediately. the benefits of a more stable and resilient financial system, by contrast, can be reaped only over the longer term and are more difficult to quantify. direct costs of compliance need to be distinguished from the costs of crises that are borne by market participants. the bailout of banks during the crisis shifted private costs to taxpayers and raised levels of public debt worldwide. reforms thus seek

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