”. in practical terms for the esrb this means finding the right balance in issuing warnings and recommendations. too few warnings entail the danger of missing systemic risks. conversely, too many warnings could be missed by the addressees. 5. sixth and seventh sybilline book : taking into account the global economy the sixth message of the sibylline books might read as follows : “ be aware of relevant developments outside your own region. ” financial stability is a systemic and a global phenomenon. and as is well known global imbalances play an important role. the savings glut is seeking safe and high yield assets. and global players can help to solve the current crisis in europe. sometimes, international investors ask me, “ why should we buy bonds from sovereigns in crisis if their european partners are unwilling to do so to a larger extent? ” my answer is “ look, the european partners have to be aware of moral hazard implications, because they are players in the european political game, ” the game, which is reminding us of the story of the purchase of the sybilline books. investors outside europe need not take into account moral hazard implications. they can and should buy such bonds because they have confidence in the long - term sustainability of the fiscal position of the countries in question, and because they are interested in portfolio diversification. progress in the various countries can be seen in ireland, for example, but also in italy, where the new government is going to implement fiscal measures. they can build on what is essentially a sound economy. therefore, my seventh and last message is this : “ european sovereigns deserve more confidence than markets are currently willing to give them. ” these are seven of the possible messages of the lost or burned sibylline books. the remaining messages may be “ known unknowns ” or “ unknows unknowns ”. thank you. bis central bankers ’ speeches

bubble were to burst. this suggests that limiting the overall increase in leverage throughout the system could have reduced the risk of a bubble and the consequences if the bubble were to burst. turning to the second issue of how to limit and / or deflate bubbles in an orderly fashion, the fact that increases in leverage are often associated with financial asset bubbles suggests that limiting increases in leverage may help to prevent bubbles from being created in the first place. this again suggests that there is a role for supervision and regulation in the bubble prevention process. for example, it might be appropriate for the federal reserve – working with functional regulators such as the sec ( securities exchange commission ) – to monitor and limit the buildup in leverage at the major securities firms and the leverage extended from these firms to their clients and counterparties. whether there is a role for monetary policy to limit asset bubbles is a more difficult question. on the one hand, monetary policy is a blunt tool for use in preventing bubbles because monetary policy actions also have important consequences for real economic activity, employment and inflation. on the other hand, however, there is evidence that monetary policy does have an impact on desired leverage through its impact on the shape of the yield curve. a tighter monetary policy, by flattening the yield curve, may limit the buildup in leverage. 1 whether it would be more effective to limit leverage directly by regulatory and supervisory means or via monetary policy is still an open question. but it is becoming increasingly clear that a totally hands off approach is problematic. i also believe we could have done better in our supervision of the large complex commercial banking organizations. for example, the recent reports issued by the senior supervisors group ( ssg ), which is composed of regulators from five major countries, indicated that the banking regulators both here and abroad should have been tougher in the assessment of the quality of management, of governance, and in terms of these banks ’ risk management there is a growing body of economics literature on this issue that links monetary policy to leverage. see, for example, tobias adrian and hyun shin, manuscript in preparation for the forthcoming handbook of monetary economics, volume 3, currently circulated as federal reserve bank of new york staff reports, no. 398, october 2009. capabilities. 2 we should also have pushed harder for better management information systems and more simplified corporate organizations and structures. we should have done more to identify best practices in terms of risk management, liquidity, capital, and compensation and pushed harder to force the laggards