rigorous monitoring can contribute to ensuring a global level playing field. the results of numerous monitoring exercises are summarised in regular scoreboard and progress reports to the g20. in addition, international standard - setting bodies are stepping up their implementation monitoring instruments. to better coordinate the various bis central bankers ’ speeches mechanisms, the financial stability board, or fsb for short, and the relevant standardsetting bodies have jointly developed a coordinating framework. within this framework, six areas have been designated as deserving priority implementation and particularly intensive monitoring. i will now briefly address four of these priority areas – leaving out those dealing with sifis as another round table today is dedicated specifically to the regulation of sifis. a. basel framework first, the crisis made painfully clear that banks ’ equipment with capital and their liquidity positions were inadequate to withstand shocks to the financial system. the new regulatory standard basel iii will improve the resilience of individual banks with respect to both their capital and liquidity positions. basel iii allows some discretion in national implementation : for example, the transition period permits jurisdictions to determine how quickly they adopt the new rules – which will depend on both the state of the national financial system and the macrofinancial environment. moreover, as basel iii is an international minimum standard, jurisdictions might adopt tougher rules than the internationally agreed versions. considering the significant differences in the size of banking sectors relative to domestic economies and the implied potential consequences in case of bank failures, i believe this to be a sensible approach. at the same time, it poses the danger of inconsistent implementation and of raising prudential or level playing field issues. therefore, the basel committee on banking supervision ( bcbs ) will monitor on an ongoing basis the status of jurisdictions ’ adoptions of the basel rules, following a three - level approach : first - level assessments focus on whether the rules are adopted according to the agreed timelines while the second level deals with the content of the domestic rules. the third level extends the analysis of domestic rules to supervisory implementation at the individual bank level to assess whether they are delivering comparable outcomes. initially, third - level assessments will focus on the calculation of riskweighted assets across banks and jurisdictions. as the adoption of basel iii – in contrast to its predecessors – has been fully integrated into the political process, the commitment to implement the new rules is extremely high. europe is playing a pioneering role in the adoption process via the capital requirements directive iv. i am confident that the comprehensive monitoring by the

last few years have been challenging, many signs point to a silver lining. there has been significant progress in reforms with the results to show for it : on - track deficit reduction, falling unit labour costs, a positive current account and last but not least a return to positive growth. to sum it up : i am very much confident with regard to the irish case. and i am more and more convinced that we are witnessing a resurgence that is instructive for the euro area as a whole. the problems experienced by ireland are by no means confined to the “ green island ”, but are typical of what went wrong in the run - up to the crisis. thus, the reforms undertaken in ireland hold valuable lessons for the wider monetary union. but what exactly did go wrong at the onset of emu? bis central bankers ’ speeches 2. the origins of the crisis for many euro - area member states, the introduction of the euro ushered in a new era of abundant capital. in the case of ireland, for instance, capital inflows amounted to about two trillion euro between 1999 and 2008. in principle, this is exactly what standard economic reasoning predicts : capital was flowing from capital - rich to capital - poor economies, where returns should be higher. such flows complemented limited domestic saving in capital - poor countries and reduced their cost of capital, boosting investment and growth. as we all know, it did not always work that way. overblown financial sectors channeled the capital flows into unproductive investments. ireland is certainly a case in point as light - touch regulation and tax incentives encouraged the financial sector to balloon. overinvestment in real estate as well as in public and private consumption failed to boost productivity. unit labour costs soared, competitiveness declined, and rigid labour and product markets meant that this process gained additional momentum. when the financial crisis broke out in 2007, the vulnerabilities became apparent in ireland. growth imploded, deficits – which were often already too high before the crisis – exploded, and cracks in the irish banking system started to show. as an aside, you may recall that these cracks extended right into germany, where irish subsidiaries or special investment vehicles got their german parent companies into trouble. not surprisingly, investor sentiment began to shift, and also interest rates in your country started to rise sharply, triggering a major crisis that is still far from being resolved. how could it all go so wrong? key to understanding the crisis is the euro area