the european parliament, its members are ultimately accountable to their national constituencies. although so far the cebs members have demonstrated a strong commitment to supervisory convergence and cooperation, a gap could emerge between aspirations towards further progress in this area and the national mandates of the supervisory authorities. ultimately it will be the continuous commitment of member states to the objective of creating a sufficiently coherent eu framework for banking supervision which will determine the success of the overall efforts of the cebs. against this background, member states may wish to consider whether the present entirely non - binding approach to supervisory cooperation will be sufficiently strong to respond to the growing challenges of effective and efficient group supervision, or whether more solid foundations may be warranted to support the work of the cebs and the other level 3 committees. ideas for strengthening cross - border cooperation among supervisors, for example by including a specific eu - related reference in the mission statements of national supervisors and / or by allowing qualified majority voting for decision - taking in the level 3 committees, are already on the table. it is certainly useful to analyse such proposals in more detail, with a view to identifying potential benefits and other implications. second, i would argue in general that the outcome of the efforts towards supervisory convergence will also be influenced by the degree of involvement of supervisors in the design of financial regulation at the eu level. experience with the lamfalussy approach in the field of securities tells us that, if the level 3 committee – in that specific case the committee of european securities regulators ( cesr ) – is strongly involved in providing advice on the draft level 2 legislation, the subsequent work on supervisory convergence and co - operation by the committee concerned is made easier since it is based on a common understanding among the competent supervisors of the scope and content of the relevant provisions. as we know, in banking cebs ’ involvement in providing advice on draft level 2 legislation is limited, due to the structure of the level 1 legislation which combines both general principles and technical provisions. therefore consideration could be given to extending the role of the cebs in this respect, also to give additional impetus to the pursuit of supervisory convergence. enhanced involvement of the cebs in an advisory role in draft level 2 legislation could also be combined with an intensified role in removing the so - called “ goldplating ”, namely the layers of national legislation extending beyond the eu rules, as well as the numerous options for supervisors provided by the current framework. in this way, a more homogeneous regulatory framework across countries would be promoted. third

perhaps we or others may do so in the future. it is by no means evident to us that we currently have - - or will be able to find - - a measure of equity premiums or related indicators that convincingly presage an emerging bubble. short of such a measure, i find it difficult to conceive of an adequate degree of central bank certainty to justify the scale of preemptive tightening that would likely be necessary to neutralize a bubble. as we delve deeper into the questions raised by the developments of recent years, the interplay between structural productivity growth and equity premiums, so evident during the past business cycle, is bound to play a prominent role. we need particularly to determine whether the periodic emergence of market bubbles, which have occurred so often in the past, is inevitable going forward. as financial wealth becomes an ever - more - important determinant of activity, we need also to understand far better how changing equity premiums affect and reflect real and financial investment decisions. if the equity premium has so demonstrable an influence on our economies as it appears to have, the value of further investigation of this topic is evident. * * * from footnote 3, k ( e / p ) = d / p = r + b - g, where d is current dividends. hence, d / p - r = b - g in conclusion, the endeavors of policymakers to stabilize our economies require a functioning model of the way our economies work. increasingly, it appears that this model needs to embody movements in equity premiums and the development of bubbles if it is to explain history. any useful model needs to credibly simulate counterfactual alternatives. we must remember that structural models that do a poor job of explaining history presumably also will provide an incomplete basis for policymaking. often the internal structure of such models has been employed to evaluate the effect of various stabilization policies. but the results from models whose internal structure cannot successfully replicate key features of cyclical behavior must be interpreted carefully. the recent importance of movements in equity premiums and asset bubbles suggests the need to better understand and integrate these concepts into the models used for policy analysis. i anticipate productive discussion of these and other issues related to stabilization policy over the next couple of days.