back on their feet again in the autumn of last year. with that i mean an exit from both the extremely expansionary orientation of monetary policy and the various non - standard measures, as these can entail risks for price stability if we wait too long to scale them back. as you can see, we are walking on very thin ice. this is why monetary policy has to perform a kind of balancing act : on the one hand, it has to swiftly counter any risks to price stability, but at the same time it must ensure that no new turbulence is triggered on the financial markets when scaling back its non - standard monetary policy measures. the bundesbank ’ s overarching mandate cannot be seen in isolation from the stability of the financial system, as financial stability is an important prerequisite for price stability. distortions on the financial markets can have an impact on monetary policy, either directly or indirectly, by substantially dampening economic momentum and growth. financial market crises make it more difficult for monetary policymakers to maintain price stability. the main reason why the stability of the financial system is so important is because financial crises cause substantial damage to the real economy, too. this was clearly illustrated by the recent financial crisis. the panic in the financial markets following the insolvency of lehman brothers spilled over to the real economy at an incredible speed. the global economy plunged into the most serious crisis since the second world war. there were even fears of a prolonged depression just like 80 years ago. fortunately, today we do not need the comfort of mark twain who betimes realised, that only “ education remains when the last dollar is gone ”. it is therefore essential that the financial markets are better and more stringently regulated in future – although “ regulation ” should not be confused with “ strangulation ” – and that the financial system becomes more resilient on the whole. the central banks will play an important role in safeguarding the stability of the financial system ; the primary objective of monetary policy, however, will still be to maintain price stability. this is what the bundesbank and the european central bank stand for. ladies and gentlemen, i hope i was able to spark your interest in central banking topics. topics which are of interest to members of staff of one central bank may also be of interest to members of staff of other central banks. this is why selected seminars should be packaged and also offered to other central banks as a collective further education programme. the opening up of seminars to

and market risks have diminished with their progressive transfer away from banks ’ balance sheets, but other types of risks have emerged. the reputation of a bank is inevitably and increasingly affected by the quality of the products it supplies to its customers. there has also been an increase in both legal and operational risks. the banks ’ increasing role in the distribution of third parties ’ products makes it crucial to monitor for conflicts of interest. it is extremely important that conduct should be ethical. the integrity and completeness of the information provided to the public must be guaranteed and internal controls must be reinforced. staff incentives must be designed to prevent the risk of improper conduct. 3. supervision international cooperation between banking, insurance and financial market supervisory authorities is strengthening. in view of the close links between the systems of the major areas - in the first place those of central and western europe and the united states, but also to an increasing extent those of eastern europe and asia - supervisory cooperation has spread to the global level. in europe, the nationally based organization of banking supervision is in conformity with the cardinal principle of the single european market, founded on minimum harmonization and mutual recognition. supervision on a national basis permits the authorities to operate near the entities subject to control. it favours a constant exchange of information and direct contact with intermediaries. this is particularly effective if it is also realized by means of a widespread presence in the territory and through on - site inspections. banking supervision is rooted in the legal and administrative systems of each country, not least owing to the possible involvement of public money in crises. europe has equipped itself with a well - structured system of multilateral cooperation and bilateral agreements between the national authorities responsible for supervising the banking and financial markets. spurred by the guidelines set by the ecofin council meeting of oviedo in 2002, in 2004 the application of the lamfalussy reform was completed, extending to the banking and insurance sectors bodies and legislative procedures that had already been introduced in the securities field. the reform process sees national authorities and european institutions engaged in speeding up the approval of harmonized european regulation, ensuring its uniform application in national law and further strengthening cooperation among the supervisory authorities. 4. derivatives in the last four years the cyclical slowdown of the global economy, stock market turbulence, the failure of large companies operating at international level and the default of sovereign states have subjected financial systems to strong pressures in both advanced and emerging economies. banks have demonstrated a great capacity to absorb the destabilizing impulses.