to the capital buffers that they retain on top of the existing minimum. if banks target buffers above the regulatory minimum, which is an endogenous market outcome, they may need to raise even larger amounts of equity than what can be expected by just looking at the current package. we know from empirical studies that weaker capitalized banks typically exhibit weak loan growth compared to other better - capitalized banks. we also know that banks may find it less costly to adjust loan volumes and loan pricing than capital, as frictions in the market for bank capital make the latter option more expensive. while the crisis has clearly had global ramifications, its impact on financial systems has not been uniform across the world. financial structures differ greatly between countries and there needs to be scope for different countries to tailor solutions to their circumstances and structures, while, at the same time, doing so within a globally agreed framework. for instance, our experience in france is that our banks ’ universal model has weathered the storm relatively well. it would be a major paradox to put in place rules that would challenge such models. finally, any regulatory framework needs to manage regulatory arbitrage and keep up with innovation and other forms of structural changes. for this, a necessary but not sufficient condition is that standards be comprehensive in coverage and consistent across jurisdictions. i am not sure, for instance, that the leverage ratio, if it were to be implemented as a compulsory instrument, would meet this double test. given existing accounting divergences, consistency will be very difficult to achieve. furthermore, it is likely to encourage migration of credit activities towards other – less regulated – parts of the financial system. convergence between accounting standards is a precondition for a consistent implementation of some of the prudential reforms discussed by the basel committee. it is also essential that new prudential standards for banks become truly universal. we should not underestimate the difficulties on the road to accounting and regulatory convergence. how can we reduce the procyclicality of financial systems? our accounting and prudential regimes have increased procyclicality in recent years. this is detrimental to a stable flow of credit to the economy. in a mark - to - market environment, asset price increases quickly translate into a larger capital base of financial institutions, which, in turn, trigger additional demand for assets and a further increase in their prices. a spiral is launched. actually this is a kind of “ inverted demand curve ” where demand increases with prices and vice

with systemic risks, there is a lot of merit in taking a closer look at what i would call “ market options ”. to reap the benefits of financial innovation and reduce its risks, we need robust and resilient financial systems and infrastructures. in this respect, concentrating systemic risks in central clearing counterparties for the most important markets ( such as interbank and derivatives markets ) may bring us a long way towards reducing them, provided these ccps are properly regulated. in this respect, i think that locating these infrastructures in the same area as that of the currency they deal in and allowing them access to central bank money are key factors. a last option which is currently gaining some international momentum concerns the possible taxation of financial institutions and activities. in principle, this idea seems quite appealing. however, the diversity of objectives that may be given to such a tax shows that the policy debate must be clarified. in a financial crisis prevention perspective, it is aimed at changing incentives and at forcing financial intermediaries to internalize the risks that their activities generate for the whole system. in a crisis management perspective, it should enable governments to recoup the costs of financial bailouts in a systemic crisis. my main concerns regarding this issue are twofold. my first point concerns the articulation with regulation. the added value of a tax over prudential regulation still remains to be demonstrated for countries, such as france, that have taken advantage of an effective regulatory and supervisory framework and in which public interventions in the financial sector have entailed no net costs to the government. my second point concerns the mitigation of moral hazard. we absolutely have to avoid situations in which the payment of taxes or levies is understood as a de facto bailout policy insurance. in this respect, the allocation of the tax to a resolution fund or to the general budget does not enable public authorities to totally remove such a risk. against this background, i think that an adequate, median way would be to extend the mandate of national deposit guarantee schemes to early intervention tools and resolution powers. moreover, we should build on the experience gained from ex ante risk - sensitive premiums, which seem to be very important for mitigating moral hazard. most of these remarks have focused on the major and vital incentive to enhance financial regulation. let me conclude by looking into the future. a macro - prudential policy framework could provide further room for manoeuvre. indeed, the crisis has illustrated the necessity to