jens weidmann : making the financial system more resilient keynote speech by dr jens weidmann, president of the deutsche bundesbank, at the 2013 fese ( federation of european securities exchanges ) convention, berlin, 27 june 2013. * 1. * * introduction president jochumsen ladies and gentlemen thank you for having me here today at this year ’ s fese convention. it is the first time i have attended this event, although there are numerous points of contact between securities exchanges and central banks. central banks and securities exchanges have in common that they provide the economy with an infrastructure which is essential for a well - functioning market economy. exchanges provide functioning and regulated platforms for the trading of securities, and so contribute to an efficient allocation of capital and resources. central banks maintain price stability, thereby among other things also contributing to allocation efficiency and laying the foundation for sustainable growth. another important task of central banks is to smooth the operation of payment systems. the eurosystem provides important infrastructure for the financial system, in particular target2. by establishing target2 - securities the eurosystem will also provide a harmonised and centralised method of settling securities in central bank money in europe that will improve settlement efficiency. 2. the role of financial market regulation some years ago, financial integration in europe was considered a one - way street leading to greater wealth. this view has been challenged by the financial crisis, since it has shown the flip - side of financial integration in europe, which is mutual contagion. in order to reap the benefits of financial integration without having the downside risk of contagion effects, microprudential regulation needs tightening and effective macro - prudential regulation has to be established. more generally, the crisis has also challenged the formerly wide - spread view that the outcome of financial deregulation is always good. adair turner, the former chairman of the british fsa, self - critically confessed in a speech he gave at cass business school in 2010 : “ we were philosophically inclined to accept that if innovation created new markets and products that must be beneficial, and that if regulation stymied innovation that must be bad. ” i definitely do not want to deny the merits of innovative, flexible financial markets. but with hindsight, i think it is also hard to deny that insufficient financial market regulation as well as inadequate oversight and supervision helped macroeconomic and financial imbalances to emerge or to intensify. moreover, differences in the speed

”. bis central bankers ’ speeches regulation is not an end in itself. the costs and benefits of the planned measures, including their side - effects and interactions, have to be weighed up. one example of this is the planned financial transaction tax. while a fundamental political consensus has been reached on the introduction of the tax in some countries of the eu, the unintended side - effects have to be considered carefully. in its originally envisaged form, the tax would also cover collateralised money market transactions, known as repo transactions. this would cause considerable harm to the repo market, which plays a key role in the redistribution of liquidity among commercial banks. however, hampering it would make banks more dependent on liquidity provision by central banks. 5. conclusion to sum up, over the past five years, substantial progress has been made in the regulation of the financial system. nevertheless, there is no room for complacency. there are still shortcomings in financial regulation to be eliminated. this notwithstanding, it is necessary to thoroughly assess the impact of the different reforms and measures. ensuring that players in the financial system have to, and are able to, better bear losses and risks themselves in future will make the financial system more stable. strengthening the principle of liability will help the financial system to serve the economy and society better. thank you for your attention. bis central bankers ’ speeches