jens weidmann : united in diversity welcoming remarks by dr jens weidmann, president of the deutsche bundesbank and chairman of the board of directors of the bank for international settlements, on the occasion of the handover ceremony for the central bank of the republic of austria ’ s ( oesterreichische nationalbank / oenb ) new governor, vienna, 1 october 2019. * * * 1 introduction dear chancellor bierlein, dear vice - chancellor jabloner, dear finance minister muller, dear president mahrer, dear governor holzmann, dear ewald, ladies and gentlemen, joseph schumpeter once said that to realise the relative validity of one ’ s convictions and yet stand for them unflinchingly is what distinguishes a civilised man from a barbarian. 1 ewald nowotny is an exceedingly civilised man. as an economist, he is aware that many insights are preliminary and potentially mistaken. at the same time, ewald nowotny is, in his charming way, always an independent and ingenious thinker. and as such, he has, for many years, left his mark on the governing council of the ecb. after all, of the remaining governing council members, only yves mersch and mario draghi can lay claim to a longer membership. from the outset, the years on the governing council demanded his full commitment. exactly two weeks after he took up office as governor of the oenb, the insolvency of investment bank lehman brothers left the financial community in a state of shock. the resolute monetary policy response helped to prevent a worse outcome. similarly, the subsequent sharp economic downturn in the euro area forced the governing council of the ecb to take unusual decisions. this period was incomparably challenging for central bankers – and instructive for us all. ewald nowotny has always unhesitatingly shared his wealth of experience with me and others. he has always been there to advise me and other colleagues if we had any questions. for that, i would like to thank you once again most sincerely, dear ewald. in all these years, the governing council has been able to count on your competence and independent judgement. but why is an independent assessment so valuable, especially in bodies such as the ecb ’ s governing council? 2 the jury theorem back in the 18th century, the marquis de condorcet, a french mathematician and philosopher, examined

authorities addressed the crisis with tailor - made rescue plans for troubled institutions. however, this piecemeal support failed to prevent a rapid erosion of market confidence, especially after the lehman failure. authorities reacted by adopting more systemic approaches to prevent bank failures. one example is the troubled asset relief program in the united states. another is the common rescue framework adopted by eucountries in october 2008. under this framework, the eu countries committed themselves to fight the crisis through explicit government guarantees on retail deposits, guarantees for bank liabilities and capital injections. these programmes succeeded in halting the deterioration of confidence in the banking sector : bank cds spreads narrowed across the board and reached a permanently lower level from the middle of october onwards. the lesson learned is that system - wide stress demands a systemic approach to reducing the risk of bank defaults. the learning effect is also true of government capital injections into banks. these measures have been much needed to avoid a collapse of the banking system. however, many of the capital injections have been eroded by rising losses on toxic assets. this has prompted a number of governments to announce asset purchase or guarantee programmes. recapitalisation of troubled institutions is not sufficient unless authorities tackle the asset problem on banks ’ balance sheets simultaneously. central bank measures to address funding pressures by banks have also benefited from advancing insights. initially, the ecb and other central banks resorted to existing tools to stabilize overnight interbank rates. but the need for longer - term funding operations to address bank ’ s general unwillingness to lend in term interbank markets quickly emerged. while central banks supported the money markets, the situation in the wholesale and debt funding markets became critical. lending by non - bank financial institutions and across currencies also started to dry up. this prompted the introduction of new lending facilities, arrange currency swap lines between central banks and widen the range of counterparties beyond conventional frameworks. the lessons from this are twofold. first, during a prolonged liquidity crisis, central banks might need to shift their focus more towards nontraditional bank funding rather than just the money market. and second, when central banks are confronted with setbacks, they need to be pro - active to overcome those challenges. as i said, authorities implemented a number of policies to fight the pandemic. some of those worked, others didn ’ t. however, each of the measures has its merits, and i would like to stress that their success or failure are a matter of hindsight. i