reducing both the likelihood of crisis at a systemically important bank and the costs to the economy in the event of such a crisis. the package consists of four complementary measures : ( 1 ) significantly more capital, and capital of better quality, ( 2 ) larger liquidity buffers, ( 3 ) rules imposing sufficient diversification to reduce counterparty risk, and ( 4 ) organisational measures. let me briefly outline some key elements of this package. the new capital adequacy regulations for systemically important banks apply to the riskweighted capital ratio and the leverage ratio. furthermore, they are designed to be progressive. put simply, the bigger the bank, and the greater its systemic importance for the domestic financial system, the higher the requirement. for institutions similar in size to ubs and cs at the time the tbtf package was initially defined, the total capital requirement adds up to 19 % of risk - weighted assets ( rwa ), of which 10 % must be held in common equity and 9 % can be held in convertible capital ( cocos ), and the leverage ratio requirement amounts to about 4. 6 %. 3 the organisational measures require banks to show convincingly – on the basis of “ emergency plans ” – that they are organised in such a way as to be able to maintain systemically important functions in the event of a crisis, thus reducing the need for a public bail - out. if they are not able to do so, the regulator, finma, may impose organisational measures. in march 2012, these new rules came into law and ubs and cs must fully comply by the end of 2018. this transitional period was introduced to mitigate potential unintended side - effects. implementation is under way. specifically, with respect to increasing their risk - weighted capital ratios, both banks have already made substantial progress. if they continue according to the plans they have announced, they will be in a position to fulfil the new regulatory for more detail on the basel iii framework, see bank for international settlements ( 2011 ). for the underlying assumptions and principles, see commission of experts for limiting the economic risks posed by large companies ( 2010 ). bis central bankers ’ speeches requirements by the end of 2014. 4 at the same time, regulators are working on the establishment of resolution and recovery plans. when finalised, these plans should enable the regulators to secure the orderly resolution of a global bank in the event of a severe crisis and, in doing so, to make

i. e. keeping mum, namely ‘ exit ’ or ‘ voice ’. 4 in my story the young economist decided to exit the corporation. this was fine because he made his way elsewhere. had he chosen ‘ voice ’, i. e. had he stayed with the company and fought for its improvement he would have had a good chance of succeeding within the organisation instead of outside of it. indeed, not a few of our young economist ’ s colleagues who stayed with this or similar companies and helped to drive them forward were duly rewarded. today some of them are even on the companies ’ boards. 5. economists in central banking “ never has central banking been more subjected to scientific analysis than during the last two decades. increasingly, the economic profession has moulded the behaviour of the central banker into abstract economic models. this has made it possible to analyse how the central banker can be given incentives that will make him do the right thing : how he should set interest rates optimally ; how he should be made accountable ; and what his punishment should be if he fails to comply with the terms of his contract. yet, after the scientific onslaught of the last decades, there is still the feeling that, after all, central banking is mainly an art, and that the success of a central banker depends on such intangibles as feeling the mood of the market. ” 5 - this quote from paul de grauwe tells us that central banking is a place where economists are particularly challenged. they have to excel as professional economists and, at the same time, they need to understand what drives the moods out there in the markets. “ scientific analysis must be combined with artistic feelings to produce a successful central banker. ” 6 central bankers assume responsibility for price stability as well as for financial stability. this in some countries includes banking supervision and financial market oversight. at the same time, they take care of the side effects of their policy on economic growth, employment and international trade. in other words, theirs is the world of economics in a very comprehensive sense of the term. the better central bankers understand real and monetary macroeconomics, microeconomics, financial market economics, labour economics, industrial economics, international trade, public finance and public choice, the better equipped they are for their task. the favourite intermediary targets or policy instruments of central banks are short - term interest rates. when attempting to influence the rate of inflation by changing interest rates one needs reliable economic models. in the swiss national bank