area sovereign debt crisis – if not before – it has become clear that government bonds are anything but risk - free. thus, i cannot see a single good reason why banks should not have to back government bonds in their balance sheets by capital, but i see many reasons why they should. in this area too, we should work to restore the coherence of regulation in the medium term – not least to address the sovereign - bank nexus. to sum up : financial regulation needs to be consistent across borders, across sectors and across asset classes. ensuring these three dimensions of consistency will help to make the financial system a safer place. however, while being a safer place in the aggregate, the financial system is not necessarily a safe place for individual banks. after all, we live in a market economy and creative bis central bankers ’ speeches destruction is a central element. individual banks must be able to fail like any other enterprise. this must also hold for large banks which are often labelled “ too big to fail ”. to allow them to fail without destabilising the entire system we need resolution mechanisms. and here again, we have a global dimension. banks that are deemed too big to fail are globally operating enterprises ; resolving them requires a great deal of international cooperation. consequently, the financial stability board has developed a set of principles for the resolution of systemically important institutions. these principles are the basis for resolution mechanisms around the world, including the single resolution mechanism in the euro area. ladies and gentlemen, i think it is obvious that to make the financial system a safer place we have to cooperate in regulation, in supervision, and in the resolution of banks. globalisation and the experience from the recent crisis have made international cooperation a central principle of economic policy. thank you. bis central bankers ’ speeches

, where credit risks are often passed from the originators of bank loans to a wide range of investors, instead of remaining on the books of the originating banks. indeed, the basel ii framework was conceived to support banks in the implementation of advanced risk management standards with the overall aim of improving the stability and soundness of the financial system in all the economies around the world. within the european union, we have gathered extensive experience with the implementation of basel ii which we are happy to share. as part of this cooperation programme, experts on banking supervision from the eurosystem will travel to moscow and support the bank of russia ’ s internal work on implementing basel ii. with regard to the internal audit component of the cooperation programme, the eurosystem will offer its expertise and advice on risk - based internal audit methods and best practices. the objective of this cooperation with the bank of russia is to enhance the capacity of the chief auditor ’ s service to carry out risk - based internal audits. in today ’ s world, central banks also need modern and sophisticated internal audit procedures. risk - based internal audits provide, on the basis of a risk analysis, assurance on the proper functioning of central bank activities, especially on those aspects where the risks are highest, rather than performing a less differentiated, simple compliance audit. such a risk - based approach represents, in our view, the appropriate response to the challenges faced by the internal audit services and we are pleased to share our experience in this field. during this part of the project, eurosystem experts will train about 350 bank of russia experts on internal audit. in the implementation of this cooperation programme, we will employ a coordinated “ eurosystem approach ” which involves the ecb and a number of national central banks of the euro area. this formula, which was conceived for the first eurosystem cooperation programme with the bank of russia on banking supervision, was successfully implemented between 2003 and 2005. over the coming 33 months, the ecb and the national central banks that i mentioned earlier will be working closely with the bank of russia on the programme. the project will be coordinated by a team consisting of ms gulsana barpiyeva, from the deutsche bundesbank, who will be the eurosystem project coordinator in moscow, mr christian fehlker, the eurosystem team leader for banking supervision, and mr lukasz kubicki, the eurosystem team leader for internal audit. the project will be managed by an ecb team