a lot, but that does not tell us how much, bis central bankers ’ speeches and in the limit there are utterly catastrophic risks for which it is not sensible to hold capital as the answer. third, when we look at the low market value of some banks relative to their book value, how much of this should we attribute to lending margins being considerably lower than they were expected to be? net interest margins are squeezed in the current environment. this is important because, to the extent this argument holds true, the action taken to deal with it, if any, could be different. another relevant consideration is to what extent it reflects different market valuations of banks ’ tangible assets or of their intangible assets, such as goodwill, that are to some extent already and will to a greater extent under basel iii be accorded no value for regulatory capital purposes. fourth, to what extent are low market values caused by uncertainty among investors about the future regulatory and operating environment for banks? this could be caused by a number of factors, including ringfencing and capital policy as supervisors adjust risk weights. fifth, by how much further should we adjust risk weights to reflect past inadequacies. and, finally, how rapidly should we make any adjustments, and how should such adjustments fit with both the basel iii implementation timetable and the changes that firms themselves are making? in conclusion, and pulling all of this together, there is a lot of talk about the need for simplicity. i agree. the proliferation of rules is unhelpful and particularly when it extends into making rules on how to supervise, a feature that we see in the eu processes. to return to kahneman ’ s point, solid intuition is a part of supervision. but simplicity is not about one - club golf, and it is not about abandoning risk - based regulation. a simple timeline would suggest that basel i did more to cause the crisis than basel ii. but the latter would surely have made it even worse had it be in place for longer. looking forwards, we do need strong judgemental supervision, and we do need the powers to separate trading activities into separate legal entities as the icb has proposed. as paul volcker recently pointed out, customer banking involves a fiduciary duty, whereas trading with counterparties does not. my only caveat here, and it is a very important one, is that the fiduciary duty of customer banking was sadly lost in the wave of mis - selling. judgemental supervision has

is largely due to falling oil prices as well as our projections that cumulative exchange rate effects will continue to taper off and food price inflation will recede to past years ’ averages. the course of inflation in 2015 will be determined by base effects. we expect base effects to pull annual inflation down until august and push it up the rest of the year. thus, we project that annual inflation will remain on a downward track until the third quarter and increase slightly to 5. 5 percent due to base effects in the fourth quarter ( chart 18 ). in addition to these forecasts, we discuss alternative scenarios on the inflation outlook and the global economy in the risks section of the inflation report. you can examine the report for details. bis central bankers ’ speeches while concluding my remarks, i would like to thank all my colleagues who contributed to the report, primarily those at the research and monetary policy department as well as the members of the monetary policy committee, and thank every one of you for your participation. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches