their loss absorbency capacity. the more losses the banks ’ investors can and must bear themselves, the lower the danger that the taxpayer will again have to come to the rescue. at the same time, the phenomenon of systemically bis central bankers ’ speeches important financial institutions shows that basel iii cannot be the final step. supplementary rules for dealing with the “ too big to fail ” problem must follow and are at the top of the reform agenda, along with the even more complex monitoring and, where necessary, regulatory treatment of the shadow banking system. one major milestone was certainly the decision taken by the group of governors and heads of supervision on 25 june of this year. the oversight body of the basel committee agreed on key procedures for dealing with global systemically important financial institutions. in future, these banks will be subject to additional capital surcharges ranging between 1 and 2½ percentage points depending on their degree of systemic importance. this will better enable companies to price the economic cost of – or any further increase in – systemic importance into their calculations. in my view, disincentives such as these are generally preferable to “ hard ” structural interventions such as explicit size limits. a third topic on the g20 agenda that i would like to touch upon is the discussion on reforming the international monetary system. this is a very multifaceted topic ranging from the treatment of capital flows, the appropriate level of foreign reserves and the strengthening of imf surveillance to the future role of the international monetary fund. the last - mentioned point, for example, concerns whether considerably more funds should be placed at the imf ’ s disposal and global financial safety nets created under the direction of the imf. in this way, financial aid could be granted more easily and under more lenient conditions than in the past. like many other imf members, the bundesbank is critical of these endeavours. there is no disputing the major role played by the imf in, for example, providing analytical insight into the crisis and managing adjustment programmes. however, global financial safety nets without adequate conditionality would weaken rather than strengthen the financial responsibility of the individual countries. particularly in light of the sovereign debt crisis, we consider this strategy unsuitable as a means of making the international monetary and financial system more resilient. moreover, central banks ’ monetary policy autonomy would be substantially restricted if the imf were to become a “ world central bank ” or the global lender of last resort – which is what almost unlimited liquid

obvious. first, reforms must be more broadly based in order to make the world economy and the global financial system more robust and crisis - resistant, thereby reducing the scale and the frequency of future crises. and second, intelligent and consistent reforms of the economic framework can only be achieved through global cooperation. despite – or perhaps precisely because of – the need for reforms, there is a not inconsiderable risk that policymakers will make decisions which are difficult to reconcile with principles of a market economy. those who are already sceptical about the market economy system and about globalisation, and who believe the current crisis to be the result of market failure rather than political failure, may even welcome this. in my opinion, however, measures that boil down to protectionism, continuous direct market intervention or more extensive macroeconomic fine - tuning are the wrong answers to the crisis. instead, the regulatory bis central bankers ’ speeches framework needs to be adjusted in such a way that the focus is again put more squarely on market - economy principles such as individual responsibility and private liability. the current sovereign debt crisis and its background serve as a strong reminder both of the limits and pitfalls of supranational economic policy cooperation and of the disciplinary effect of market signals, incomplete though that effect may have been prior to the crisis. at institutional level, considerable progress has been made since the outbreak of the crisis. for example, the g20 has assumed the role of predominant international forum for financial policy. the financial stability forum was expanded to become the financial stability board, with a significantly widened range of tasks and members, and is a key driver of the reform of financial market regulation. within the european union, too, institutional consequences were taken in the wake of the crisis. a european system of financial supervisors was set up, comprising supervisory authorities for banking, insurance and securities markets, to achieve closer cooperation in european financial supervision, as well as the european systemic risk board, or esrb for short. the esrb represents the first time that macroprudential surveillance has been established at european level. the central banks of europe have a vital part to play here because of the expertise they possess. it is at the global level that, in some cases, widely diverging ideas on the role of economic policy collide. occasionally we experience joint commitment to the principles of free and open markets, only to find that effectively implementing reforms is a good deal more difficult. the g20 agenda clearly demonstrates that. it features a framework