joachim wuermeling : banking regulation and the benefits of international cooperation - basel iii and beyond speech by prof joachim wuermeling, member of the executive board of the deutsche bundesbank, at the konrad adenauer foundation, washington dc, 7 february 2019. * * * ladies and gentlemen, welcome to the “ gold room ” of the konrad adenauer foundation. i am honoured to welcome you all – your attendance today surely makes this lunch a golden opportunity to exchange ideas and perspectives on the future of transatlantic and international cooperation. we are probably all having quite difficult conversations in our jurisdictions at the moment about what transatlantic cooperation – and what international cooperation – can do to achieve a prosperous economy over the coming years and decades. how can cooperation support the goals of prosperity, stability and progress? my personal view is this : our prosperity hinges heavily on the interdependencies of our economies. that ‘ s what makes cooperative frameworks that create reliability and trust so important. take banking regulation as an example — here we have a fairly successful track record of international cooperation : the basel committee of banking supervision is a semi - formal network of supervisors from currently 28 jurisdictions. since 1974, regulators in the committee have been developing international minimum standards and guidelines to harmonise the supervision of internationally active banks. even though its standards are only non - binding agreements, these are typically implemented in more than 100 countries. during its 45 years of international cooperation, the basel committee has achieved a lot : it ensures a clear - cut separation of work and cooperation between home and host supervisors, so that the activity of international banks cannot fall through the cracks. it fosters the continuous exchange between supervisors and thereby helps build mutual trust. the basel minimum standards reduce the opportunity for regulatory arbitrage. and in the process, they reduce the likelihood of a regulatory race to the bottom. i like to think of basel as an example of the value of international cooperation. and as such, the basel committee was crucial as a forum to make sure that regulatory reforms after the financial crisis were developed in international accord. the final pieces of this international reform effort were achieved with the committee finalising the basel iii standard. the basel iii package, which includes reforms developed between 2009 and 2019, will make internationally active banks safer in the future. and yet i would like to bring one sobering fact to your attention : since the basel committee started its work, financial crises have not become fewer but more frequent. how can that be? one reason is regulatory

a bank on my street corner. once i have created the deposit account and put my savings into it, i can withdraw up to that amount at will. a deposit is something that the bank owes me ; in other words, it is the bank ’ s liability. crucially, the deposit can be redeemed with immediacy. i can show up at the bank atm or at the bank teller, demanding that my money be paid back to me – show me the money! why might i need to do this? a bank deposit is the place where i save for the rainy day – my health expenses, my tuition fees, my day to day expenses. some of these needs are predictable, some random ; each time i withdraw at the atm or the teller, or write a cheque or do a wire transfer, i am demanding my money from the bank. each instance i do not demand my money back, i am rolling over the deposit to the next instance. bank deposits are thus savings that i have kept with a bank. i trust them to be safe and to be demandable at will. i am happy to earn a low interest rate on them as they provide me valuable 1 / 7 bis central bankers'speeches liquidity services, allowing me to meet my day to day and the occasional lumpy payment needs. what are bank loans? there are many depositors like me parking their savings in the bank. viewed this way, the bank is a safety vault or a storage technology. however, most of the time, the deposits are not being withdrawn and are simply being rolled over. even when withdrawn, the deposits are not being redeemed at the same time. for instance, my health expenses are not coincident with those of my neighbor. in other words, there is much saving in the bank that is lying idle. let us now bring into picture others in the economy who are potential borrowers. a bright young woman down the street has been a successful consultant, but wants to have a shot at building a new enterprise. she needs financing beyond her savings to put her bright ideas to test. there is a new construction just completed and several young couples, first - time home buyers, are looking to purchase houses there. they have some capacity to make down - payments for the properties but must avail of extra monies that they can repay over the course of their lives. an old family needs money for medical expenses to treat a long - term illness. they cannot afford to spend