the incentives of a protection scheme are affected by the way that contributions are decided. ideally, members should pay contributions in line with their individual burden of risk. riskbased contributions are, incidentally, also what the eu directive and the german implementing act require. for a joint - liability scheme such as that operated by the savings bank sector, it is essential that the contributions made by the leading institutions in the group are commensurate with their respective risk levels. in my opinion, the system of contributions proposed by the european banking authority gives too much weight to covered deposits, with the result that the central institutions, which have smaller deposit levels, are not adequately taken into account. however, incentives are not affected solely by the system of contributions. intra - group claims – in other words the lending relationships between the individual members of the protection scheme – also play a role. it can be assumed that the savings bank sector will aim to continue treating intra - group claims on a privileged basis. this makes perfect sense for a collective, as the redistribution of liquidity is one of its central functions. however, this provides incentives to build up high levels of reciprocal claims, above all within the collective. a balance needs to be struck here between an internal redistribution of liquidity and an excessive build - up of internal financial relations, which could be a source of stability risk. the right incentives are therefore crucial for the stability of a protection scheme. specifically, this means that the protection system as a whole must be able to manage risks. in this vein, the capital requirements regulation requires institutional protection schemes to have centralised risk management. it is only through this centralised structure that liability and control can be brought into balance. i do, of course, understand that it is difficult to square this type of centralised approach with the regional responsibilities and decision - making channels of the savings bank sector, and, not least, its decentralised self - conception. nevertheless, i believe that a tenable solution can be found, and i would warmly welcome it if all group partners would commit to achieving this. a balance must be found between those who benefit from a protection scheme and those who are disadvantaged by it. however, time is of the essence, as the statutory requirements must be fulfilled by july of this year. bis central bankers ’ speeches 4. conclusion as the philosopher pericles said in 500 bc, “ it ’ s not a matter of predicting the future, but of being prepared for it. ” and this still

certainly not to take on more and more risk in the search for yield. in the worst case, that kind of “ quest for yield ” can contribute to the formation of price bubbles. looking ahead, i want to be able to count on bis central bankers ’ speeches the savings banks to run their lending business prudently and responsibly – not least in the real estate segment. and as for the possible answer that savings banks should charge their own depositors negative interest rates – that is something which banks alone should decide at their own discretion, not banking supervisors. as supervisors, we have no intention of intruding on your decisions. the response to the current challenges can probably be found primarily on the cost side – staff resources can be deployed even more efficiently, and operating outlay can be reduced. as a case in point, there are some savings banks which still run a relatively large branch network, and a growing number of them will probably be wondering whether that is still in keeping with customer demand, demographic change and changes in customer behaviour. to sum up : like it or not, we will have to get used to the idea that the persistent low - interestrate environment will take a heavy toll on savings banks ’ bottom line. particularly the pressure on net interest income is likely to intensify further, pushing down savings banks ’ operating results. the good news is that many savings banks do have sufficient resources to hold their own in the medium term, even amid such inclement conditions – provided they aren ’ t hit by a huge wave of write - downs in the future. all things considered, savings banks now need to adopt a strategic and operational stance that will guide them through these choppy waters as best they can. incidentally, it is not just the low interest rates which are forcing credit institutions to rethink their strategic alignment – developments like the growing digitalisation of banking business also need to be considered. 3. reforming protection schemes let ’ s now turn our gaze inwards on the shoal ’ s structure. it ’ s clear that the structure of the savings bank sector will have to change. the reason for this is the need to comply with the requirements of the eu ’ s new deposit guarantee directive and the german deposit guarantee act. these, in turn, necessitate a swift reform of the sector ’ s institutional protection and joint liability schemes. the new eu directive requires all credit institutions to provide their depositors with statutory deposit protection cover of €100, 000 by