s claessens, r j herring and d schoenmaker, a safer world financial system : improving the resolution of systemic institutions, 2010. quoted from a turner, the turner review : a regulatory response to the banking crisis, march 2009. the fsb key attributes specifically mention the supervisory and resolution authorities, the central banks, the finance ministries and the bodies responsible for statutory deposit protection. bis central bankers ’ speeches october 2012. as the second component, the institutions themselves must submit plans describing how they envisage a potential restructuring and discuss them with supervisors. ideally, the supervisory authority would be able to take these plans out of the drawer in the early stages of a crisis and restructure the institution in cooperation with the resolution authority. this planning process is useful for the institutions as well. according to a recently published survey involving 19 big financial institutions, 40 % of those questioned claimed to have drawn up complete recovery plans. despite the costs involved, the majority of the surveyed institutions see the advantages in this planning process, for example in that they provide a better operational understanding of the business structures. 6 if restructuring is not possible or fails, the third component comes into play, namely that of resolution planning, which is to be developed by the authorities. the purpose of this is to prepare for the effective use of the resolution tools. the resolution of an institution has to be planned in such a way that systemically important functions performed by the institution are continued, the stability of the financial system is not jeopardised, and the use of taxpayers ’ money is avoided. 3. from standard - setting to the application of the new rules 3. 1 the european commission ’ s proposal for a directive ladies and gentlemen, these and other standards from the key attributes are a milestone on the road to containing the too - big - to - fail problem. on the one hand, the fact that international consensus has been reached with the backing of top g20 policymakers can be considered a success. on the other hand, a great deal of detailed work remains to be done since the fsb key attributes still have to be transposed into legal texts which, by necessity, have to be much more concrete than the international standard. just how difficult this is may be seen from the fact that the publication of an eu legislative proposal originally planned for the summer of 20117 has since been postponed several times, and has yet to be presented. i do appreciate the fact that, before making a publication, the european

the financial system has already overcome the crisis. first of all, the major central banks are left with balance sheets that have ballooned. the amount and the structure in question differ in line with the diverging strategies pursued. nevertheless, this applies to all major central banks, including the european central bank. we firmly believe that these inflated balance sheets should not belong to a state of new “ normal ”. in the long run, the persistent burden of inflated balance sheets might jeopardise the credibility of monetary policy. this is all the more the case as the independence of central banks and their capacity to act appear to be crucial. last week, the european central bank increased its key interest rates, ending the period of almost two years in which rates were at an all - time low level. the monetary policy stance remains accommodative. to preserve its contribution to growth and employment, it is essential that inflation expectations remain anchored in spite of recent price developments. it goes without saying that we did not complain about the headline of the financial times ’ article on the rate hike. the article was entitled “ ecb becomes bundesbank ”. second, public indebtedness has reached critical levels in many countries, giving rise to doubts about sustainability. public finances are already facing huge challenges posed by rigid structural deficits and demographic developments, and the strains have been further aggravated by the transformation of private debt to public debt in rescuing financial institutions and by high expenditures to avert recession. in europe, we understand the current debt crisis as the third stage of the crisis. finally, large parts of the financial systems may seem, at a first glance, to be working well again. nevertheless, moral hazard is still prevalent in the markets, fuelled by the implicit assumption in the markets that governments will rescue banks, if needs be, by spending bis central bankers ’ speeches taxpayers ’ money. and by holding down interest rates and the cost of carry central banks may again be encouraging risk - taking that might sooner or later lead to a resurgence of high leverage and, with it, new excesses. acknowledging all the progress that have been made in the global banking system, especially in raising capital buffers and in sound liquidity management, there is still a long way to go in creating proper incentives in the financial sector. in one major respect, germany has become a frontrunner. at the beginning of this year, the german government introduced a new resolution scheme which facilitates the restructuring of distressed banks at the cost of