keeping the conglomerate running. the existing framework for information sharing and policy coordination between the home and host supervisors was flawed, to put it mildly. and there was no pre - arranged plan for funding in case of resolution. i remember that once the agreement was struck about nationalisation of the dutch parts of fortis, the dutch state treasury had to go to the market to raise 50 billion euro practically overnight. a large part of this was needed to secure funding for fortis bank netherlands. 50 billion, that was almost one fifth of our pre - crisis national debt. on top of that we had to provide massive emergency liquidity assistance. i could go on and on. it could easily have become our european lehmanmoment. 1 / 4 bis - central bankers'speeches prior to 2008, we had never thought about these things in a thorough and consistent way. as a result, we had to take a lot of ad hoc measures during the global financial crisis. these measures were successful in the short term, in the sense that we were able to prevent an even bigger disaster. but in the long term the societal cost was high. the use of taxpayers'money to support banks was not well received by society and it created perverse incentives. private gains, public losses. for a solid banking system there needs to be a credible threat that banks, like any other company, can go out of business if they take on too much risk. that credible threat can only exist if there is a reliable system for putting troubled banks out of business without triggering a financial armageddon. so, after the global financial crisis governments, central banks and supervisors, under the leadership of the g20 and the financial stability board, improved their tools for making banks more resilient. by mitigating risks and building buffers. and for those cases where these first and second lines of defence are not sufficient, we also built a third line of defence, the resolution framework : legislation, instruments, authorities, planning requirements for both authorities and banks, in order to make sure that a bank failure does not destabilise the financial system and threaten basic public functions such as saving and paying. over the past 12 years, a whole resolution infrastructure has developed. this goes for the banking sector, but also for insurers and ccps, albeit at a less advanced level in most jurisdictions. in many countries today, designated resolution authorities are in place that possess the necessary legal powers and operational capacity to intervene in, and resolve,

is a difficult question. but they have certainly been given the wrong incentives. a less difficult question is whether talent was always and everywhere employed in a productive way. here my answer is no. many financial instruments were not invented to finance the ownership of additional homes, to finance productive investments or education or see brunnermeier ( 2009 ). see philippon and reshef ( 2009 ). to help firms hedge the uncertainties of currency or interest rate risk. some of these instruments were invented to generate fees without creating social value. the way forward looking ahead, what can be done to ensure that financial institutions return to the path of virtue? the extent of the financial crisis leaves no doubt that tighter regulations and supervision are required to overhaul the financial system. but a fine line needs to be drawn between ensuring financial efficiency – and financial innovation is an important ingredient of efficiency – and financial stability. excessive, ill - designed regulation may counteract our intentions. to improve the resilience of the financial system we need first to identify the sources of instability and fragility. not all financial institutions have been equally involved in developments that led to the 2007 / 2008 financial crisis. it seems that the current predicament originated mainly in institutions that had moved away from traditional retail banking, from institutions that increasingly relied on non - interest income and non - deposit - funding. 15 these insights should serve as a starting point for shaping the contours of the post - crisis financial system. reforms should be designed in a way that ensures that those segments of finance, which remain faithful to the mission of providing functional services to the real economy, are not put at an economic disadvantage. profit maximisation sets the incentives in a market economy to achieve first - best outcomes. but just as employers bear a social responsibility for their employees, banks bear a social responsibility for savers and for society as a whole. reforms must be targeted at internalising this social responsibility in business strategies so that what is collectively optimal is selected by profit - maximising business units. i see three elements at the core of efforts to reform the international financial system : the first ingredient is a mechanism that enforces transparency in financial structures. this is essential for the financial industry to return to its prime mission of assessing the quality of investment. the trend towards more sophisticated financial instruments has not been matched by increasing disclosure requirements. sellers of securitised products must disclose all information about the underlying loan structure so that both investors and rating agencies can correctly price the