the face of coming demographic challenges, costly stimulus measures could even backfire via negative confidence effects. is the case for higher investment therefore completely without merit? no, but arguments in favour do not stem from cyclical considerations : they stem from structural considerations. where germany ’ s growth potential is concerned, there is agreement that higher public investment does have a role to play. with regard to the size of the investment gap, however, there is probably no agreement. it is important that all investment measures are judged on a case - by - case basis, as we have seen in the past that not all public investment measures have been money well spent. and we should focus on shifting priorities in public expenditures. there is no need for a debtfinanced fiscal stimulus, but for a structural shift of government expenditures from consumption to investment. reforming the financial arrangements between the federal, the state, and the municipality level could encourage that shift. somewhat more autonomy with regard to revenues might alleviate the problem of lacking funds to some extent. at the same time, however, it has to be ensured that the overall tax burden does not increase. bis central bankers ’ speeches 4. reforms for resilience ladies and gentlemen the reforms laid out so far, together with other widely discussed structural measures and sound public finances, would allow the euro - area economy to shift gears and accelerate. but they do not in themselves guarantee that the engine will run more smoothly and reliably. this is where reforms addressing the euro area ’ s institutional architecture come in. the euro area teams up one common monetary policy with 18 national fiscal and economic policies. this approach reflects a currency area composed of sovereign member states. it grants member states sufficient leeway to preserve their diversity, that is to establish their own business models or to tailor institutions and policies to their own national preferences. at the same time, it leaves the consequences of such decisions with the respective member state and consistently rules out the option of mutualising public debt with other euro - area states. but this set - up also creates vulnerabilities. first, a combination of this kind gives rise to a deficit bias, as it allows the costs of fiscal imprudence to be shifted partially on to others. an unsustainable fiscal situation in one country has repercussions for monetary union as a whole. you can compare this to what economists call the “ tragedy of the commons ”. just as overfishing creates negative externalities for other countries, excessive public debt harm

andreas dombret : systemic risks of shadow banking speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the salzburg global seminar “ out of the shadows : should non - banking financial institutions be regulated? ”, salzburg, 20 august 2013. * * * when talking about shadow banking we should be clear what we mean. i subscribe to the fsb ’ s definition of “ credit intermediation involving entities and activities outside the regular banking system ”. what i deem to be relevant from my financial stability perspective is that such entities create bank - like risk without being subject to banking regulation. obviously, the non - banking financial sector is composed of a very heterogeneous set of agents. some of them – such as insurance corporations and pension funds – usually have very long - term investment horizons and can therefore potentially serve as a stabilising element for the financial system. to be clear on this point : i firmly believe that insurance corporations can be systemically important institutions, too. thus, effective resolution regimes for global systemically important insurance corporations need to be developed and implemented. the overall effects of the so - called shadow banking system and its activities on financial stability are ambiguous. theoretically, non - banking financial institutions that perform banklike activities are associated with diversification and specialization benefits. therefore, it could be assumed that they contribute to efficiency gains and greater financial system resilience. however, empirical evidence from the financial crisis suggests that the activities of shadow banking entities might often be driven by the motive of exploiting regulatory arbitrage. altogether, the economically beneficial attributes and systemically stabilising effects of entities and activities of the shadow banking system are not always that obvious. in particular, developments prior to the financial crisis revealed that the activities and entities of the shadow banking system can also pose a threat to the stability of the financial system as a whole. the risks inherent in the shadow banking system pertain to both dimensions of systemic risk : the cross - sectional ( interconnectedness ) dimension as well as the time - serial ( procyclicality ) dimension. i see these potential threats as being caused mostly by maturity and liquidity transformation, the build - up of leverage and credit risk transfer conducted by the shadow banking system. all of those activities are not evil per se, but the ensuing systemic risks need to be contained. all activities must be made transparent, in particular vis - a - vis supervisory authorities, and they must be