liabilities ) and tlac ( total loss - absorbing capacity ), which are good ideas for banks that are mainly financed in the market, but do not work as expected for banks essentially dependent on deposits. the latter are obliged to go to the markets and to issue debt with high costs that, in all likelihood, will be taken up by other banks, thus creating negative externalities for the stability and resilience of the financial system as a whole. this is particularly worrying because it can undermine the construction and sustainability of the banking union. 2 / 3 bis central bankers'speeches 4. financeable risk and risk that is acceptable to society banks take risks as part of their normal activity. however, when such risks are excessive they can lead to huge losses – not only for banks and their investors, but for the whole economy. regulation plays a key role in reducing vulnerability and sources of risk and in containing the costs of financial instability when it arises. nevertheless, it should be taken into account that the higher the capital required for the banking system, the higher the intermediation cost, decreasing the credit multiplier. a banking system with minimum risk means a banking system with maximum cost and, hence, smaller capacity to finance investment. if it is accepted that the financial system has to take some risk, regulations must lay down how society should react when risk becomes systemic, for instance, setting out the role of the different stakeholders in these cases. regulations should seek to make the financial system safer, but flexible enough to fulfil its function as a driver of economic development while being adaptable to new paradigms, namely to those resulting from technological innovation. society ’ s preferences in terms of financial security are not always consistent with the economy ’ s financing needs or risks arising from innovation. i will stop here, resisting the temptation to keep talking about these important and fascinating issues related to the regulatory and supervisory institutional frameworks in europe. let me just wish you a rich and fruitful debate and a very pleasant stay in sintra. thank you for your attention. 3 / 3 bis central bankers'speeches

real economy. 5 as recognised by the single supervisory mechanism, “ [ b ] anks can and should exit the market if they are managed in a risky and unsound manner, or if they are structurally incapable of maintaining their competitiveness based on a sound business model. ” 6 in such cases, the authority entrusted with ensuring financial stability should be equipped with the necessary instruments to safeguard confidence and ensure the financing of the economy is not 1 / 4 bis central bankers'speeches disrupted. post - global financial crisis, this has been achieved through the establishment of resolution frameworks whereby the usage of public funds is minimised. new powers and tools have been created and entrusted – in many cases to central banks – to ensure that critical operations of banks can continue and value is preserved while losses are mostly absorbed by shareholders and creditors with the aim of preserving financial stability. new institutions have also been created. the creation of the european systemic risk board ( esrb ), nine years ago, was a milestone in this respect. in sum, first, financial stability is inherent to the mandate of central banks ; second, microprudential supervision is essential but not sufficient to safeguard financial stability. macroprudential supervision is also needed and it should be entrusted to the entities that are better placed to assess systemic risks, i. e., the central banks ; third, in order to conduct macroprudential supervision and succeed in their mandate central banks need adequate instruments ; fourth, financial stability is not about preventing bank failures, it is about safeguarding depositors ’ confidence and preserving the regular financing of the economy. adequate resolution and liquidation frameworks, including access to public funds, are thus an indispensable part of the crisis management toolkit. it should also be noted that the low interest rate environment of recent years may require a more active stance of the macroprudential authorities as it contributed to a build - up of vulnerabilities and risks to financial stability. let me now turn briefly to today ’ s programme. since its inception, macroprudential policy has gradually been implemented in europe against a unique financial and economic background, establishing itself as an autonomous economic policy area while interacting with other policy domains. this is a topic that will be addressed at this conference, in particular at the roundtable where the interaction between macroprudential and microprudential policies will be dealt with. this environment, characterised by crisis legacies, led, unsurprisingly, some macro