its strong commitment to the rapid implementation of the basel iii agreement. as it was already said earlier in this eurofi colloquium, great attention is presently given to this very important piece of legislation, to verify and make sure that it is fully in line with the agreements reached at global level through the basel committee, the fsb and the g20. i am confident that this work will be satisfactorily concluded. sifis another important step taken to strengthen the resilience of the financial markets is the agreement reached on global systemically important financial institutions. a key lesson from the crisis is that incentives need to be put in place for banks to reduce their “ systemic footprint ”. so i am very pleased that at end - june this year the group of governors and heads of supervision, which i had the privilege to chair, adopted the consultative document regarding global systemically important banks. the envisaged measures have several objectives. these objectives include reducing the probability of an adverse event occurring, reducing the extent or impact of the failure of a systemically important bank and reducing the cost to the public sector. the framework is built on two building blocks that increase the loss absorbency of global systemically important banks. the first building block is a gradual capital surcharge based on the degree of systemic importance, ranging from 1 % to 2. 5 % of risk weighted assets. bis central bankers ’ speeches the second building block is that the additional capital requirements have to be met with common equity. the unambiguous choice of common equity as the unique instrument to meet the capital surcharge should ensure robustness. these measures complemented with supervisory judgement should capture structural and cyclical changes in the banking system. shadow banking the introduction of more stringent capital requirements for credit institutions under basel iii as well as the requirements for global systemically important banks, may provide incentives for banks to shift part of their activities outside the regulatory perimeter. it is therefore decisive that we continue our work to improve our capacity to identify and assess the potential risks stemming from the shadow banking system. we need to develop a better understanding of the interconnections between regulated and non - regulated entities. we also need to explore the possible channels of contagion that may result in adverse market dynamics. gaining a better understanding of the functioning of the shadow banking system is a key element of and a precondition for improving the efficiency of financial regulation and supervision across markets and jurisdiction. i strongly encourage the fsb

jean - claude trichet : intervention at the eurofi financial forum 2011 speech by jean - claude trichet, president of the european central bank, at the eurofi financial forum 2011, wroclaw, 15 september 2011. * * * ladies and gentlemen, it is a great pleasure for me to be back here at the eurofi financial forum. these events always provide a very good opportunity to exchange views on issues that are central to the effective functioning of the financial sector and its key task of supporting sustainable growth in the real economy. as we are all well aware, this is a very challenging time for the advanced economies. we avoided a dramatic economic depression in the autumn of 2008 – following the collapse of lehman brothers three years ago to this very day. but we still have a long way to go to move beyond this crisis. at the pittsburgh summit two years ago, the g20 leaders reiterated their promise to do “ everything necessary to ensure recovery, to repair our financial systems and to maintain the global flow of capital ”. now, more than ever, we need to make significant progress in delivering on those promises. today, i would like to focus on what has been achieved so far by our collective efforts to repair our financial systems – in particular, the establishment of the new european supervisory structure, the agreement on basel iii and the global framework for systemically important financial institutions ( sifis ). but i also want to look at the road ahead : we must not stop here and leave our task halffinished. there is still very important work to be done on a number of regulatory challenges. and with all our reforms and with all our new institutions of economic and financial governance, we must ensure timely implementation so that we can ensure that we have done everything to make a difference as regards the resilience of the global, regional and national financial systems. the esrb let me start with some of our accomplishments before moving on to highlight some key areas where we need to make progress. the first accomplishment is the establishment of the european systemic risk board ( esrb ) earlier this year. as you know, the esrb brings together the policy makers such as central banks, supervisors and the commission, thus fostering a broad - based review of risks and vulnerabilities and a deeper understanding of interlinkages and spillovers between different parts of the financial system. this wide - ranging perspective, which encompasses both micro and macro elements, is an essential feature of the new european supervisory framework and it