willem f duisenberg : the transformation of the european financial system welcome speech by dr willem f duisenberg, president of the european central bank, at the second ecb central banking conference, 24 - 25 october 2002, frankfurt am main, 24 october 2002. * * * ladies and gentlemen, i am pleased to welcome you to frankfurt, to the second ecb central banking conference, entitled " the transformation of the european financial system ". this event is the largest and most important open ecb conference and is held every two years. the first ecb central banking conference took place in november 2000. it focused on price stability, which is the ecb's primary objective, and that of many other central banks worldwide. it was a successful event, and i am convinced that this year's conference will be too. indeed, looking around, i am happy to see that this second conference has evidently aroused much interest and attracted researchers from leading institutions, officials from most of the major central banks, from ministries of finance, various european and international bodies and the media. in view of this year's topic, we also decided to invite representatives from commercial financial institutions and from supervisory authorities. i should like to extend a special welcome to the representatives of the central banks of the countries that are negotiating to join the european union ; these negotiations will hopefully be concluded fairly soon. i should, of course, also like to thank the speakers, discussants, panellists and chairpersons of the sessions. since the early days of the ecb and the first ecb central banking conference, sufficient time has passed for us to assess whether we at the ecb have made an effective contribution to the relationship we have with the academic world. the academics here today should be the first to be asked this question. from our side, i am inclined to say that we have been effective. i am in particular referring to the success of our graduate research and visitors programme. in this context, i should like to announce the establishment of five fellowships for young researchers working in top - priority fields within the financial research network. the executive board has decided to call these fellowships the'lamfalussy fellowships ', in honour of the first president of the european monetary institute ( emi ), who has made an impressive contribution to the process of european monetary and financial integration. another example of successful co - operation and exchanges of information between the academic world and the ecb is the launching of a series of conferences and research networks.

. concluding remarks let me conclude. the regulatory community has been striving to establish a framework that makes our financial system more resilient. while much has been achieved, i do not believe that we can now rest on our laurels. on the contrary, in particular the three remaining tasks outlined today require our continued effort. the basel iii package for the banking sector should be implemented in a timely and consistently manner across jurisdictions thereby ensuring that a level - playing field is preserved. as attention shifts towards maintaining the resilience of the banking system over the financial cycle, macroprudential policy and related quantitative assessments become prominent. adding a macroprudential dimension to stress tests of the banking sector is essential. finally, developments in the non - bank financial sector call for an active monitoring and the extension of the macroprudential policy toolkit to this sector. thank you for your attention. 1 see the fsb framework for evaluating the effects of the g20 financial regulatory reforms. 2 see, for example, carmassi, j., corrias, r. and parisi, l. ( 2019 ), “ is taxpayers ’ money better protected now? an assessment of banking regulatory reforms ten years after the global financial crisis ”, macroprudential bulletin, issue 7, ecb, march. the results of this analytical work show that, on the one hand, the average probability of default ( pd ) of euro area banks decreased from 3. 5 % in 2007 to 1. 1 % in 2017, less than a third of its pre - crisis value. on the other hand, banks ’ loss - absorbing capacity increased from 7. 2 % of total assets in 2007 to 16. 9 % or 55. 5 % of total assets in 2017, depending on the assumptions on the scope of the bail - in. this increase in loss - absorbing capacity was due to the introduction of larger capital buffers and the new resolution framework, notably the bail - in tool and the potential intervention of the single resolution fund. considering the combination of decreased pds and enhanced loss - absorbing capacity, the ability of the banking system to absorb losses while minimising the cost to taxpayers has increased more than three - fold over the last ten years under the scenario of a narrower scope for the bail - in tool, and twelve - fold under the scenario of a broader scope for the bail - in tool. 3 more details are available on the ecb website. 4 see budnik k.