the economy. the liquidity provided stabilised the financial system, but it also inflated asset prices. 6 the aftermath of the expansionary monetary policymaking before the crisis should serve as a reminder not to make the same mistake twice. providing an endless flow of liquidity as a kind of painkiller does nothing to tackle the root cause of the economic challenges we are facing. the second painkiller frequently administered to support financial development in the precrisis era was deregulation and a “ light touch ” in regulation and supervision. the idea behind this approach was that lenience would fuel increased investment. unfortunately, it inflated the credit bubble. solid regulation and responsible supervision is the key to limiting future bubbles. yes, we ’ ve already achieved a great deal since the crisis – basel iii and tlac at the global level ; doddfrank in the us ; the banking union in the euro area. and some are saying we ’ ve already gone too far. the evidence, however, tells a different story : it is higher standards that strengthen credit intermediation and economic development. that ’ s something worth remembering in the face of what are, intuitively, compelling claims about capital costs. these claims have been discredited by the experience gained during the crisis and by empirical evidence. 7 european systemic risk board ( 2014 ) is europe overbanked? report of the advisory scientific committee no 4 / june 2014. b s bernanke ( 2013 ) a century of u. s. central banking : goals, frameworks, accountability. speech given at the conference ‘ the first 100 years of the federal reserve : the policy record, lessons learned, and prospects for the future ’, on 10 july 2013. m bordo and j landon - lane ( 2013 ) does expansionary monetary policy cause asset price booms ; some historical and empirical evidence. nber working paper no. 19585. a admati and m hellwig ( 2013 ) the bankers ’ new clothes : what ’ s wrong with banking and what to do about it, princeton university press ; c m reinhart and k s rogoff ( 2008 ) this time is different. eight centuries of financial folly, princeton university press. bis central bankers ’ speeches in sum, these policies did not constitute a sustainable lifestyle, nor did they deliver a systematic cure. rather, they turned out to be painkillers. so the big question i ’ m asking myself is this : should we carry on treating the symptoms by

. some participants in the discussion on crisis management envisage further, more extensive agreements. however, i see the danger that flexibility in financial crisis situations will be limited if such further, more extensive agreements are reached. each crisis is unique. predetermined contingency plans would restrict flexibility and could therefore impede an optimum solution being reached. this applies even more, as a private sector solution always has priority. ex ante agreements on the sharing of the financial burdens of a crisis are, in my opinion, unfeasible and problematic. to be honest ladies and gentlemen, i ’ m finding it difficult to think of an appropriate conclusion. i will, therefore, finish by asking you to bear my initial comments in mind. thank you very much for your attention. see : ecb, the eu arrangements for financial crisis management, monthly bulletin, february 2007, p 73 ff.