governance and risk management in banks. the recent review of the basel core principles effective banking supervision is therefore very timely and welcome. the matter has been amply discussed in previous interventions in this conference and i shall not pursue it in detail. i concur with other speakers that the use – in a nonmechanical way – of market signals and indicators like a rapid growth of assets is important – and, in fact, already widespread. in general, sharpening supervisors'tools is surely needed. let me only sound a note of caution on all this. even with the best principles and tools, supervisors will never be omniscient or omnipotent. with the benefit of hindsight, one can always find a better course of action that the authorities might have taken in a specific case. however, without perfect foresight, and with no waterproof basis in regulatory requirements, it is not always obvious that the authorities would have been in a position to do beforehand, in an analytically and legally robust way, what post factum appears optimal. supervision must be continuously improved, by all means ; but regulation remains fundamental. further issues for the future finally, looking beyond microprudential rules for banks, let me mention two further issues that the broader system of financial regulation needs to address - and are, in fact, being actively discussed in international fora. 1. countercyclical macroprudential rules. disruptive exogenous shocks ( the pandemic was an extreme case ) require releasable capital buffers. the basel committee has endorsed the concept of using cycle - neutral positive buffers to absorb systemic shocks and avoid procyclicality. many european countries, including italy, have introduced this measure with, as far as i can see, minimal costs. 2. non - bank financial intermediaries ( nbfis ) : nbfis'share in financial intermediation, and their interconnections with the banking system, have grown considerably. credit suisse's exposure to archegos and greensill is just one example of the latter ; the basel committee's reflections5 on it are a valuable starting point for defining better rules for banks. more generally, the fsb's work on nbfis'impact on financial stability is proceeding, albeit slowly. to conclude : the 2023 market turmoil has lessons for regulators and supervisors. 4 / 5 bis - central bankers'speeches banks have proven resilient, but

supervisors must remain vigilant. implementing and updating international standards is crucial to adapting to new challenges. after all, for supervisors there are always'interesting times'ahead. 1 i wish to thank francesco cannata and fabio recine for their very valuable input. 2 the role of internal models has been fundamentally revised. for certain risks, such as the credit valuation adjustment and operational risks, rather than questing for perfection, the bcbs simply accepted the idea that models cannot provide meaningful estimates. for other risks, such as credit risk, the new standards constrain the possibility to achieve capital optimisation by imposing input floors as safeguards against overoptimistic assumptions ; moreover, the advanced modelling approach can no longer be used for certain portfolios where data are too few and cannot yield statistically robust estimates. for market risk, the bcbs fundamentally revised the approach to modelling to make it more consistent with the complexities of modern trading activities. an output floor was set as a safeguard against model risk. 3 the weighted average cet1 ratios of the main global banks included in the basel monitoring exercise sample almost doubled, from around 7 to around 13 per cent, and the leverage ratio almost halved, from around 3. 5 to around 6. 5 per cent. the liquidity position improved strongly ; the lcr and nsfr were always well above their minima during the same period. see the'evaluation of the impact and efficacy of the basel iii reforms'report, published in december 2022. 4 let me also recall, as the issue of asset valuation is sometimes raised, that in the lcr high - quality liquid assets ( hqla ) are marked to market and subject to haircuts. 5 see bcbs,'newsletter on bank exposures to non - bank financial intermediaries ', december 2022. 5 / 5 bis - central bankers'speeches