well. early in the crisis, structured investment vehicles and many other asset - backed programs were unable to roll over their commercial paper as investors pulled back, and the programs were forced to draw on liquidity lines from banks or to sell assets. 6 the resulting pressure on the bank liquidity providers, evident especially in the market for dollar - denominated loans in short - term funding markets, impeded the functioning of the financial system throughout the crisis. following the lehman collapse and the “ breaking of the buck ” by a money market mutual fund that held commercial paper issued by lehman, both money market mutual funds and the commercial paper market were also subject to runs. 7 more generally, during the crisis, runs of short - term uninsured creditors created severe funding problems for a number of financial firms, including several large broker - dealers and also some bank holding companies. in some cases, withdrawals of funds by creditors were augmented by “ runs ” in other guises – for example, by prime brokerage customers of investment banks concerned about the safety of cash and securities held at those firms or by derivatives counterparties demanding additional margin. 8 overall, the emergence of run - like phenomena in a variety of contexts helps explain the remarkably sharp and sudden intensification of the financial crisis, its rapid global spread, and the fact that standard market indicators largely failed to forecast the abrupt deterioration in financial conditions. the multiple instances of run - like behavior during the crisis, together with the associated sharp increases in liquidity premiums and dysfunction in many markets, motivated much of for a theoretical discussion of “ margin spirals ” and related phenomena, see markus k. brunnermeier and lasse heje pedersen ( 2009 ), “ market liquidity and funding liquidity, ” review of financial studies, vol. 22 ( 6 ), pp. 2201 – 38. institutional details on the triparty repo market and a description of developments in that market during the crisis are provided in adam copeland, antoine martin, and michael walker ( 2010 ), “ the tri - party repo market before the 2010 reforms ” ( pdf ), federal reserve bank of new york staff reports 477 ( new york : federal reserve bank of new york, november ). the role of the “ run on repo ” in the crisis is discussed in gary b. gorton and andrew metrick ( 2009 ), “ securitized banking and the run on repo, ” nber working paper series 15223 (

, scenarios that would have been considered “ adverse ” in the past have already materialised. inflation and market interest rates have seen their steepest increases since the euro was launched. this poses challenges for the financial system : rising interest rates support banks ’ revenues in the medium term, but they also lead to asset writedowns and higher funding costs. in germany, higher interest rates have already resulted in substantial valuation losses in banks ’ securities portfolios. [ 4 ] higher rates may also contribute to higher credit risk in the future, as firms ’ and households ’ balance sheets could deteriorate. so far, the financial system has been able to cope with higher risks and losses. but all stakeholders have to remain vigilant and make sure that the financial system stays sufficiently resilient to weather potential adverse shocks. third, the german economy is facing major structural challenges : higher energy prices and heightened geopolitical risks are putting pressure on the economy to adjust and adding to underlying structural shifts such as demographic change and digitalisation. hence, a resilient financial system is needed that functions even during periods of stress and that can support structural change in the real economy. banks need to have sufficiently large capital buffers to absorb future losses without turning to fiscal or monetary policy support. absent sufficient capital buffers, negative shocks might lead to credit losses for banks, which would in turn contract their lending activities. such a credit crunch could exacerbate a crisis in the real economy. against this background, let me turn to the main features of core that i mentioned at the beginning of my talk, and allow me to explain how these relate to our practical policymaking. 2 evidence - based policymaking financial stability is a relatively new designated policy area. macroprudential instruments and institutions that take regulatory action were only established in many countries in the wake of the global financial crisis. central banks typically have an important role to play in financial stability policymaking, but they are not the only actors, not least because macroprudential policies can have distributional consequences and thus require democratic legitimacy. this is one reason why macroprudential policies should be embedded in a policy cycle, which serves to make the process more transparent and enhances accountability. such a “ cycle ” is distinct from an " electoral cycle ", and it consists of four main steps. i will use the example of the recent macroprudential policy package introduced by bafin ( bundesanstalt fur finanzdienstleist