andreas dombret : where do we go from here? the future of us - eu financial relations following the finalisation of basel iii speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the institute of international bankers, annual washington conference, washington dc, 5 march 2018. * * * 1 introduction ladies and gentlemen thank you for the kind introduction. it is a pleasure to be in washington and at the iib ’ s annual conference. let me use this opportunity to give you my perspective on the future of us - eu financial relations at this well - suited moment, given that the most important post - crisis global reforms have now been finalised. when i was going to prepare this speech, i asked myself : “ what do all of us in this room have in common? ” do bankers and supervisors across the atlantic share the same convictions? do we have the same ideas on financial policy? honestly, i am not perfectly sure on this. so i assume there is at least one major area of common ground, and that is the uncertainty we feel with respect to how things will proceed. take global banking regulation – and basel iii, in particular. on the one hand, we have just finalised basel iii, the global minimum standard for international banks. on the other hand, parliaments and governments in the united states and the european union are debating regulatory changes that seem to diverge from this global compromise. banks remain uncertain about precisely what the regulatory future holds. moreover, this uncertainty does not stop at finance. the us administration ’ s economic policy announcements, as well as brexit and other elections, are causing many to call into question the extent to which nations will actually coordinate their future economic policies. this tension between the global and national level creates political uncertainty. for example, many enterprises feel insecure about the economic policies under which they will have to do business in the future. likewise, bankers are asking how much of basel iii will be implemented in their jurisdictions and wondering about the individual paths that some countries will take. this tension between global harmonisation and cooperation, on the one hand, and countries ’ demands for individual approaches, on the other, will be one of the main fault lines – if not the crucial one – in future us - eu financial relations. let me elaborate on this challenge. 2 what we should – and should not – expect from international harmonisation recent years have made us confident – perhaps a little overconfident

##marktes beeinflußt sparquote und konsum, wirtschaftsdienst nr. 1926 vom 24. 3. 1999 ; l boone, c giorno and p richardson, stock market fluctuations and consumption behaviour : some recent evidence, oecd economics department working papers, no. 208, dec. 1998. see s ludvigson and ch steindel, how important is the stock market effect on consumption? in frbny economic policy review, july 1999, p. 32. downside risk associated with the savings gap in the national economy caused in part by wealth effects. scale and underlying causes of the decline in private savings in germany unlike in the united states, savings trends in western europe as a whole, and in germany in particular, have been less dramatic and rather quiet. even so, there have been some major structural changes in germany, too. for example, the private savings ratio has been declining in germany since the early - 1990s as well. if, as an initial stage of adjustment to the new methodology of the esa 95, the calculation of savings is extended to include the purchase and use of private residential property and the related financing process, then the private savings ratio is estimated to have fallen by around 3 percentage points between 1991 and 1998. at around 10½ % latterly it roughly corresponded to the 1967 level. the decline in savings in germany has thus been somewhat weaker than in the united states, although it stands in marked contrast to the development in other countries ( such as france and the united kingdom ). 9 since german unification the declining trend in savings also contrasts quite clearly with the cyclical savings pattern which – although quite often eclipsed by special factors – had prevailed in western germany since 1970 in line with the development of households ’ real incomes. the pro - cyclical savings behaviour suggests that german households basically preferred as steady a supply of consumer goods as possible. in doing so, they were guided by the experience that changes in income growth are often not of a permanent nature. furthermore, there exists the tendency of adjusting only gradually to a new income situation. both factors resulted in the savings ratio cushioning discontinuities in the income trend at least for some period of time and thus helped in a certain sense to smooth consumption over time. the fact that the previous savings pattern gave way to a continuous downward trend from the early 1990s initially reflected a return to normal from the high level reached in 1990. at that time, the