to achieve this objective : ( i ) improved loss absorbency and resilience, ( ii ) improved recovery and resolution, and ( iii ) improved supervision. assessing the effects of reforms requires a distinction between private as well as social costs and beneﬁts. the internalization of systemic externalities and the withdrawal of implicit tbtf subsidies results, ceteris paribus, in an increase in funding costs. like the introduction of a pollution emission tax, an increase in funding costs will be perceived as a cost of reforms by private market participants while, at the same time, contributing to lower “ emissions ” – hence lowering the costs of ﬁnancial crises to the taxpayer. the withdrawal of subsidies also has implications for the risk - taking of banks. the optimal level of risk taken by tbtf banks from a private perspective can be higher than the socially [UNK] level of risk : owners of banks fully reap potential proﬁts but only partially bear potential risks due to the expected government bailout in case of distress. excessive risk - taking implies costs for society : if risks materialize, taxpayers may face additional costs related to the need to rescue the bank. regulatory reforms aimed at internalizing the external costs through, for example, higher loss absorbing capacity and provisions to facilitate the orderly resolution of tbtf banks thus have the potential to increase social welfare. but these reforms may come at a net private cost for the affected banks as they will incur costs to comply with the new regulation and are likely to face higher funding costs. in an ongoing evaluation conducted in 2019 and 2020, the financial stability board assesses whether the implemented reforms are reducing the systemic and moral hazard risks associated with systemically important banks ( sibs ). [ 9 ] the evaluation will also examine the broader effects of the reforms to address tbtf for sibs on the overall functioning of the ﬁnancial system. this project focuses on a core objective of the g20 ﬁnancial reforms : to address the systemic and moral hazard risks associated with systemically important ﬁnancial institutions ( sifis ) ( fsb 2011 ). beyond resolution regimes, policy measures to address the “ too - big - to - fail ( tbtf ) ” problem include a more intense supervision of sifis and higher requirements for their loss absorbing capacity. the project will assess whether perceived implicit funding subsidies have changed ; how much progress has been made regarding the resolvability of systemically important banks ; whether this has affected bank behavior ; and

whether there have been broader effects of the reforms on the real economy. the fsb published its work plan, invited feedback on it, and solicited supporting evidence of reform effects from respondents. this is in line with the fsb ’ s aim to be open and transparent and engage in a dialogue with a broad range of stakeholders. to put the evaluation on a ﬁrm methodological foundation, the project is conducted with input from academic advisors. there are further opportunities for interaction with the fsb evaluation teams : external stakeholders will engage with the team in workshops and roundtables, and a consultation report will be published in june 2020. the role of macroprudential policy in a monetary union credit booms and a potentially resulting debt overhang are crucial determinants of the likelihood of ﬁnancial crises, their severity, and the strength of the recovery that follows. this is why monitoring debt levels and macroprudential policy are particularly important in a monetary union with a joint responsibility for monetary policy but national responsibilities for key policy areas potentially affecting ﬁnancial stability. most central banks relate the stability of the ﬁnancial system to its ability to cushion shocks so as to mitigate the costs of ﬁnancial distress for the real economy. the bundes ‐ bank ’ s deﬁnition is in line with this notion. it follows the idea that the ﬁnancial system should constantly be able to fulﬁl its key macroeconomic functions : financing investment, providing savings opportunities, allocating risks, and maintaining the payments system. a stable and resilient ﬁnancial system fulﬁls these functions and does neither amplify nor trigger an economic downturn. it should consistently be in a position to absorb losses from both ﬁnancial and real economic shocks. consider a negative shock to the economy and to the net worth of ﬁrms. this may trigger a negative spiral, causing credit defaults, and a reduction in banks ’ capital. capital ratios will decline, potentially leading to the breach of regulatory capital requirements. at the same time, market participants will revise expectations and require higher levels of capital over and above the regulatory minimum. how can banks react? in theory, they could accumulate additional equity capital internally through retained earnings or by raising fresh capital on markets. in practice, however, this route will be blocked in a crisis. hence, banks can restore required levels of capital only by divesting assets and deleveraging. this adjustment, in turn