, liquidity, leverage, interconnectedness / systemic significance and structure ) when designing their business models. despite this progress, there is still work to be done here and there. • we must convincingly weaken the connections between a country and its banks in the long run. government bonds continue to be considered by regulators as largely risk - free : there is neither an obligation to have capital available that is commensurate with the risks, nor are there rules that address concentration risks. this cannot be allowed. • we must also improve the calculation of equity in individual banks. a great deal of confidence has been lost in this respect over recent years. internal bank models are today seen by many to be a means for risky capital optimisation and not as a useful tool for bank management and risk - based supervision. to restore confidence, we bis central bankers ’ speeches need less complexity and more transparency. not every portfolio or risk can be modelled. for these portfolios, we must use simple, standardised approaches. we must reduce the complexity of the model - based approaches to a level which allows both the banks ’ supervisory bodies and the supervisory authorities to understand and review them within a reasonable period of time. standard approaches should also be used here as a control variable and indicator for capital savings. • given the great number of regulatory measures, it is important not to lose sight of the bigger picture. we will therefore carry out a comprehensive analysis of the overall effect of regulatory measures. this project is already being planned and prepared by the basel committee. such an exercise will do us good and will also be beneficial to the general debate on regulation, helping objectify it. i hope that this work will not only result a list of overlaps, duplication and other inefficiencies which we would subsequently clear up. i also expect that we will address unintended consequences of the new rules. in supervision, too, much needs to be changed. the crises of recent years did not come about solely because there were weaknesses in the regulatory framework. the supervision of banks did not function optimally, either. the consequence of the crisis is therefore not only that the supervision of banks has shifted from the national level in the euro area to a european level, but also that supervision has changed in its basic approach and in what is expected of it and the supervised entities. • the ssm has allowed us to start afresh in our relationship with banks. it has broken with traditions and customs that were often no

from inflows through the portfolio rebalancing channel? last but not least, your third item, the discussion on the hidden risks to bond markets, is probably the most challenging topic. it is widely known that market participants often tend to focus on the same risks at the same time. but today ’ s discussion should be an exercise in thinking outside of the box to try to identify potential pressure points and gauge the likelihood of these risks materialising over the short to medium term. do you see a concentration of risk in certain asset classes? does the continued popularity of exchange - traded funds harbour risks for financial market functioning, in particular in times of stress? to what extent is algorithmic and high frequency trading in the fixed income space a cause for concern? are you observing certain financial market practices that seem unsound or unsustainable to you? let me conclude by saying that we greatly value the structured interactions we have with you to inform our understanding of ongoing financial market developments. the topics discussed at today ’ s bond market contact group meeting could not come at a better time, given the recent bond market developments and the recent governing council decisions. since the inception of our market contact groups, you have informed us about financial market dynamics, some of which were less well known though nonetheless important. you have raised concerns that helped us diagnose potential pressure points in the financial system. and your market insights have been helpful in our efforts to increase the efficiency and effectiveness of the implementation of our monetary policy. thank you again for your participation today. 3 / 3 bis central bankers'speeches