funding for banks, including lower capital requirements than otherwise would be the case. the economic value of this confidence is almost surely rather low at very healthy banks during good economic times. however, the value can be very much greater for any bank in financial distress, and can skyrocket in times of systemic financial crisis. as chairman greenspan noted in congressional testimony recently : what was it worth in the late 1980s and early 1990s for a bank with a troubled loan portfolio to have deposit liabilities guaranteed by the fdic, to be assured that it could turn illiquid to liquid assets at once through the federal reserve discount window, and to tell its customers that payment transfers would be settled on a riskless federal reserve bank? for many, it was worth not basis points but percentage points. for some, it meant the difference between survival and failure. empirical research on the option value of deposit insurance supports the point i am trying to make. estimates of the option value of deposit insurance, while subject to many caveats, show that riskier banks have considerably higher option values. what does all of this mean for the appropriate organizational form that future banking organizations should take? now that is, i need not tell this audience, a complicated question! but i think the basic questions that we must answer are clear. first, assuming that one of the goals of public policy is to not expand the safety net subsidy, what organizational form minimizes the chances of such an expansion? second, assuming that another goal of public policy is to limit the opportunities for banks to exploit the moral hazard incentives inherent to the safety net, what organizational form best ensures the safety and soundness of banks? the holding company organizational structure has a proven track record of helping to achieve both of these public policy goals. indeed, years before i joined the board, previous boards worked hard at convincing market participants that there is a clear distinction, in terms of access to the safety net, between a bank and its affiliates. market practice supports the view that we have achieved considerable success at making this distinction. to me, it seems not only logical, but highly desirable that we should build on this success as we continue to modernize our banking and financial system. when thinking about this issue, it is instructive to understand that in recent years bank holding companies have in fact tended to move activities from the holding company back into the bank. these activities had originally been put in the holding company to avoid geographic and similar restrictions. as a result of this movement

andreas dombret : local currency bond markets and international capital flows introductory statement by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the third international workshop on developing local currency bond markets in emerging market economies and developing countries, co - hosted with the world bank group and the international monetary fund, frankfurt am main, 17 – 18 november 2011. * * * ladies and gentlemen although the topic “ developing local currency bond markets in emerging market economies and developing countries ” rarely makes the headlines, it has rightly met with growing and broader political support in recent years. this is a reflection of the great significance that domestic bond markets in this region have for national and global financial stability. for this reason, we are very pleased that this topic has been one of the main agenda items during the french g20 presidency in 2011. what is more, this lends greater continuity to the g20 process and to the discussion of the g20 topics. besides ensuring that summit decisions are implemented, this also gives these decisions greater public credibility. this applies, in particular, to the establishment or expansion of financial markets, which will take decades rather than just a few years. since the asian crisis, many emes – supported by numerous global, regional or national institutions – have been successful in their efforts to deepen their local bond markets. nonetheless, further challenges lie ahead. at the global level, the g7 finance ministers and central bank governors agreed in 2007 that developing local currency bond markets ( lcbms ) deserved more political support. the bundesbank backed this process in close cooperation with the federal ministry of finance and played a major part in drawing up the g8 action plan, which was endorsed in may 2007. since then, the bundesbank has, with the international monetary fund and the world bank group, co - hosted three international workshops dealing with ways to implement the g8, and now the g20, recommendations. and in the years ahead we will continue to play an active role in this initiative in very fruitful and constructive cooperation with all of you. the significance attributed to lcbms for national and global financial stability is also reflected in the fact that, as part of the g20 process, this topic was – inter alia – dealt with by the international monetary system ( ims ) working group. a report on their findings was submitted to the g20 finance ministers and central bank governors ; this topic was also on the agenda of the heads of state