andreas dombret : what is “ good ” regulation? speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the 16th euro finance week, frankfurt am main, 19 november 2013. * 1. * * what is “ good regulation ”? i would like to thank the hosts of the euro finance week for raising this important topic of “ good regulation ” – even though fifteen minutes is not very much time to give a comprehensive report on the topic. the first question that occurs to me in this context is : who is regulation supposed to benefit in the first place? regulated parties are likely to have a different take on the matter to supervisors and society at large. instead of focusing on the theory, i therefore want to take a pragmatic approach to the topic, and to explain three key aspects from the regulators ’ point of view – although i cannot, of course, give an exhaustive account in this speech. first, “ good regulation ” of financial markets pursues a clear objective, in my opinion : to create a sound framework for the financial system and thus ensure its stability. a stable financial system ought to be able at all times to fulfil its core task of allocating capital efficiently. in other words : efficient funding of the real economy should be constantly assured. that is the main yardstick we should use to measure regulation. to keep the financial system stable, it is therefore important to apply a fundamental principle of market economies – incentive and punishment mechanisms – to regulation : risk - taking and liability have to be consistent with one another. this means that those who take risks in order to make profits also have to shoulder the risks involved – irrespective of their institutional form or size. 2. put an end to “ too - big - to - fail ” this principle, however, was nullified during the crisis. several banks facing the threat of bankruptcy had to be bailed out by governments with taxpayer funds. these banks were regarded as too complex, too interconnected or simply “ too big ” to fail. there were fears that their failure would have a dramatic effect on the financial system and the real economy. regulatory policy considerations took a back seat, and taxpayers were ultimately on the hook for risks on banks ’ balance sheets. the implied government guarantees for such institutions, which were already thought to exist before the financial crisis, were thus de facto confirmed. that goes against the principles of a market economy. private funds should be used

earn income through entrepreneurship, and set the foundations for their future through financial literacy. in the light of these objectives, during the week, a number of activities will be organised such as lectures, contests, and visits to commercial banks and the museum, aimed at including as many students as possible. this year ’ s motto “ money : you reap what you sow ” highlights the importance of money matters as a necessary means to achieve and maintain welfare. the activities that will take place during this week seek to draw the attention of the children and young people to the significance of personal finance and the impact of well - informed decisions on the personal success of each one of us individually, and of the whole society. 1 / 2 bis central bankers'speeches like in any other educational activity of the bank of albania, beyond the message that we want to convey, we consider that the inspiration, originality and pro - active thinking are determinant elements for an effective comprehension of a complex, at the same time practical, topic such as finances. we may proudly say that all the submissions for the contests are characterised by these elements, thus demonstrating that, though challenging, the financial education of children and young people may be and is possible. moreover, their work and commitment is an incentive to us to introduce more ambitious projects and expand this activity, geographically, each year. the contests for students from nine - year schools and high schools have been welcomed and the number of participants has been higher each year. this year, around 55 nine - year schools, 14 high schools, 8 universities and over 1000 pupils and students in 14 cities were involved. this success is also owed to the teachers and professors, whose passion has contributed to materialising all these efforts. concluding, i would like to thank you all for the insofar cooperation and avail myself of the opportunity to invite all the participating institutions to continue and intensify the cooperation in the future, in the commitment to contribute to the future generations and the albanian society. 2 / 2 bis central bankers'speeches