the major question in this context is about the optimal level of capital banks need to hold. so what is a sufficient capital basis for banks in the long run? i would like to see that from a functional perspective : a bank is sufficiently capitalized, when – even after a major external shock has materialized – the bank is still able to refinance itself on the market at reasonable spreads. banks on their own define what reasonable spreads are from their perspective as spreads differ depending on size, business model and region. hence, investors that fund european banks rather than regulators or supervisors define the longterm optimal level of capitalization. this means also that there is an upper limit for bank capitalization. above a certain level you will not find anybody to invest in bank shares. similar and connected to the issue of optimal capital level is the introduction of mrel ( the minimum requirement for own funds and eligible liabilities ) and therefore the question on how much mrel is needed? the mrel requirement is designed to ensure a ‘ bail - in ’ of shareholders and creditors in the case of a failing bank. it safeguards that a bank has sufficient shares and debt instruments issued to absorb losses or to convert into new shares to recapitalize systemic functions. in particular, it is questionable how capital buffers are linked to the amount of mrel needed. in my opinion, it strongly depends on the bank ‘ s individual resolution strategy. if a bank is not recapitalized in a resolution it does not need to mirror its capital buffers in the mrel amount. moreover, if a bank in resolution is fully or close to 100 % recapitalized it will also not need to include its capital buffers fully in the mrel amount as capital buffers shall absorb losses in times of stressed periods. however, the right balance of mrel has to be found to ensure that the recapitalized institute has sufficient capital to access funding markets. let me come to another often quoted assumption in the context of financial regulation : higher capital requirements restrict bank credit supply. what do we observe? higher capital requirements cause deleveraging but without hampering credit to private sector7 : capital has contributed the lion ’ s share to the leverage reduction in the euro area ( 88 % ) and austria ( 73 % ) between oct. 2008 and feb. 2014. contrary to popular opinion, bank funding for the real economy and for governments has increased even after the crisis, despite substantial deleveraging both in

between a digital public money, like cbdcs, and other forms of digital private money. as central banks embrace these new forms of money, it is crucial for us to enable the right financial innovations to flourish while ensuring that the core financial systems that underpin our economy remain stable, trustworthy, and resilient. sound regulations are 2 / 6 bis - central bankers'speeches essential. and in some areas, we may also need to consider establishing shared infrastructure for public goods, just as we have done with payment systems in the old world. so far as regulations are concerned, a delicate balance has to be struck. too stringent an approach may stifle financial innovation, as the industry becomes overly risk - averse or reliant on the central bank to dictate the direction of innovations. an overly lenient approach, on the other hand, could potentially undermine the central bank's effectiveness as a stable monetary anchor for common citizens, businesses, and financial institutions. this could result in a digital economy dominated by a few closed, privately - run platforms that prevent the emergence of more affordable and efficient solutions. it is therefore crucial to strike the right balance between enabling innovation and maintaining stability. central banks should continue to play their role in the provision of public money serving as a trusted monetary anchor, enabling the private sector to confidently develop innovative, value - adding financial products for consumers and businesses. in this connection, a cbdc should be viewed in the context of these functions of the central bank in the monetary system. to build on the current two - tier structure, central banking institutions like the hkma should underpin the foundation of our payment systems. this is a model that we have explored together with the bis innovation hub in 2022 under project aurum, where wholesale cbdcs will be used by regulated financial institutions, and customer - facing activities will be assigned to the private sector, just like today under a two - tier system. keeping in mind these developments, through the lens of the regulator, it is clear that we need a holistic digital money framework that will facilitate the healthy co - existence of public and private money to support our future digital economy. a digital money framework this digital money framework will encompass different forms of tokenised money, which consumers and businesses will likely see and adopt in the years to come. our intention is to provide the necessary guidance and creative freedom for the industry to experiment with new technologies and develop innovative solutions. this framework is the collation of