better. vii the global financial markets are certain to test the euro, the political and economic conditions in the euro area and the stability orientation of the european central bank as well. basically, they are already doing so today, even though the euro and the european central bank do not exist yet. it would be an illusion to believe that the global financial markets look critically only at the emerging countries. the vital asset of a central bank is credibility. the decisions taken in brussels to fill the vacancies on the executive board of the ecb essentially enhanced that credibility, if anything. actual independence from the influence of political bodies is essential for the future credibility of the european central bank. in my view, independence does not at all conflict with the requirements of democracy as long as the european central bank abides by its mandate. of course, adequate transparency of its decisions in the sense of explaining them to the general public and stating the reasons for them, is important. accountability in this sense vis - a - vis the european political bodies, and especially vis - a - vis the european parliament, is useful and right. however, accountability must not undermine the largely apolitical character of the euro or its supranationality. accountability vis - a - vis the national parliaments would not, in my view, be consistent with the euro ’ s supranationality. from the very outset, it will therefore be essential for the european central bank to gain and retain the necessary confidence of the markets. credibility normally develops gradually, on account of one ’ s own track record. to that extent, it seems to be a privilege to be able to inherit credibility from the national central banks. in this context, the bundesbank, as the guardian of the d - mark ( the long - standing anchor currency of the ems ) naturally plays an important part. this legacy, too, is of course not without obligation. rudi dornbusch, carlo favero and francesco giavazzi recently wrote in an article : “ the capital markets will be unforgiving if they see anything less than bundesbank policy. ” in various respects the d - mark and the bundesbank have acted as the model for the euro and the ecb. seen from a historic perspective, however - and in conclusion i should like to come back to that point - there are some far more impressive models. as far as longevity and historical consistency are concerned, i hope that the euro and the european central bank

##cies into account. what is a treasure trove for researchers – the host of questions surrounding the functioning of the new set of instruments – is tricky terrain for policymakers, and for central bankers in particular. shedding light on the use and effectiveness of different macroprudential instruments therefore remains an eminent task of economic research, and i am positive this conference will provide a valuable contribution. does this mean that monetary policymakers can ignore the financial stability implications of their actions? i don ’ t think so. while i am not in favour of a dual monetary policy mandate, i am convinced that monetary policy cannot stand on the sidelines when financial imbalances build up. first, we cannot be sure that macroprudential policies will eliminate financial imbalances. the experience with macroprudential instruments is still limited, and the toolkit is still incomplete. second, the crisis has vividly demonstrated how financial instability affects inflation developments and the capacity of the central bank to safeguard price stability. therefore, monetary policy would be wise to take the implications of financial imbalances for price stability into account. as a first line of defence, however, it is financial regulation that has to bear the brunt of the financial stability burden. with regard to traditional microprudential regulation, the direction for reform seems clear : realigning risk and reward in a way that sets incentives for sustainable action. privatising gains and socialising losses is not only socially corrosive : it also produces bad economic results, as financial actors are encouraged to take on excessive risks. a cornerstone of the international efforts to ensure the resolvability of systemic banks is the standard for bail - in debt, the so called total loss absorbing capacity ( tlac ). it requires those banks to hold a minimum of debt that can absorb losses in the case of a bank resolution. this shields the taxpayer from footing the bill. europe already has a bail - in standard of its own, the so called minimum requirements on eligible liabilities ( mrel ). for efficiency and financial stability purposes, one could argue that tlac and mrel should be as similar as justifiable. systemically relevant banks pose a special challenge when it comes to resolving them without creating substantial repercussions for the wider financial system. for that reason, the single resolution fund exists. when resolving a systemic bank, the single resolution board, which is the relevant european authority, can draw on the resources of this fund – but