local financial market. at the time, the cnb was just the bank regulator and there were three other supervisory institutions. this government decision made us work hard to take over the others and bring them under the cnb's roof. this was actually not what the government had originally envisaged, but we were lucky and won the battle. some think it was a 1 / 2 bis - central bankers'speeches kind of hostile takeover. no matter what it was, it took some time to complete – parliament did not approve the integration plan until the end of 2005. the cnb became the sole supervisor in april 2006. there is one more important anniversary this year that no one speaks of. ten years ago, at the end of november 2014, the board decided to introduce a supervisory tool to address potential sovereign risk in the banking sector. as far as i know, we were the first and likely the last authority in europe to establish any kind of sovereign risk instrument. every year since 2015, the cnb has conducted a public finance stress test and informed banks whether sovereign exposures above a certain level could be subject to a pillar ii capital add - on. to begin with, we were silent about the introduction of this tool as well. the decision was revealed in june 2015. at the time, it was viewed as a temporary solution before eu - wide regulation kicked in. with the benefit of hindsight, we were lucky to act early, before the window of opportunity was closed by the failure of the high - level working group of the european economic and financial committee to agree on anything in this area. in summer 2015, the eu authorities recommended to " await the outcomes of the basel committee ". we are still waiting. to be honest, the window of opportunity created by the sovereign debt crisis in the euro area was wide open back then – we even managed to convince the ministry of finance to support the introduction of the tool. looking at the state of public finances across a number of advanced economies today, one slogan inevitably comes to my mind as to the future : never waste a good crisis! for now, enjoy the conference. 2 / 2 bis - central bankers'speeches

standard deviation ( sd ) in the market ’ s underlying probability distribution, whereas arguably central bankers are worrying about greater - than - one - standard deviation events. the market ’ s assessment of such risks can perhaps be gauged by looking at how much of the current option - implied distributions lie beyond one sd compared with option markets in the past, and with historical outturns. for bonds and equities, a little bit more of the probability mass implied by options11 is currently in the lower tail ( beyond one standard deviation ) than is the case over fairly long - runs of historical outturns12 ( table 2 ). but for equities, bonds, and dollar exchange rates, the lower probability mass is pretty well in line with the average ‘ tail ’ implied by options markets in the past ( charts 4 - 5 ). that does not suggest much sensitivity to the various risks preoccupying the official sector. this is a different point from that, advocated for example by chairman bernanke, explaining a fall in long - maturity risk - free rates in terms of an ex ante imbalance of global savings and investment. the two explanations are not mutually exclusive, as the observed fall in yields on indexed government bonds could reflect a combination of a fall in the risk - free rate and falls in term premia. for example see bank of england financial stability report, overview, july 2006, pp 5 - 13 and bank of england inflation report, november 2006, chapter 5. using three - month expiry options. since the 1930s for equities ; 1960s for bonds ; and 1970s for exchange rates. market contacts offer various explanations for this – some of them, i should make clear, sceptically. one – and here bear in mind my earlier remarks – is that not much really nasty will happen given the collective wisdom of the world ’ s monetary authorities. another is that, in an environment where investors are chasing yield, collecting the premium income from writing options has become a prevalent way of sustaining returns in the hope that nothing too bad happens ; and that if it does, today ’ s liquid capital markets will contain the volatility anyway. in other words, they base their explanation on what has been going in the financial system. financial system uncertainties big, perhaps fundamental, changes have been underway in banking and capital markets for a few years now, with implications for how we gauge money and credit conditions, and assess the resilience of the financial system as a