consequence, refinancing stood on a basis that was prone to disruption. admittedly, it was indeed possible to observe similar developments at other large banks. however, the ownership structure of the landesbanken would have suggested other, namely lower risk preferences and a different business orientation. this practice was, in any case, a long way removed from the idea of the landesbanken, in terms of their lending policy, making a contribution to the development of their own federal state. the business policy of such landesbanken had moved a long way from the principle of decentralisation. this explains why these institutions were hit particularly hard by the financial crisis. these trends were evident right up to the brink of the crisis. with the crisis, there occurred the second big event of the past decade from the point of view of the landesbanken. the crisis revealed the vulnerabilities of the business models : with the crisis of confidence in the interbank market, the landesbanken were now faced with major wholesale funding problems and, in several cases, even by considerable needs for write - downs that had to be covered by taxpayers. credit substitution business collapsed. and in the wake of the general deleveraging process, domestic business was rediscovered. 4. from crisis - prone business models to a restructuring of the landesbank sector one thing seems clear to me in this context : for the majority of landesbanken, the issue of stable business lines and structures can be delayed no longer. what therefore has to be done to put less crisis - prone structures in place? the future viability of the landesbanken sector hinges quite crucially on whether it is possible to develop sustainable business models and also on the willingness to reduce capacity surpluses. up to now, there has been only isolated large - scale cost - cutting measures and, at most, selective adjustments to the business models. certainly, there is no master plan for the transition from crisis - prone business models and structures towards a robust reorganised system. nor is it the central bank ’ s or the supervisors ’ job to develop the specifics of business models. the supervisors ’ task in this area is merely to verify the consistency between business and risk strategies, and any structural change should, as far as possible, be subject to market processes and the business rationale of the savings banks and the other supporting organisations. nevertheless, it may indeed be possible to sketch out a few key features of a

mechanism of monetary policy ”, coorganised by the bank for international settlements, basel, 26 september, reprinted in bis review 116, p 3. in this section, i am drawing on my recent keynote speech “ fundamental issues of stabilising the financial system ”, delivered at the conference on " determinants and implications of the financial crisis " of the frankfurt school of finance & management bankakademie, frankfurt, 17 september, reprinted in bis review 115, pp 1 - 7. the list of recommendations agreed by consensus and adopted by the financial stability forum ( fsf ) is at the heart of the longer - term international response to the financial crisis. this includes, first, an improvement in the supervisory framework for capital and liquidity as well as risk management within the context of basel ii. second, the role of ratings and rating agencies is under scrutiny. and, third, there has to be enhanced transparency of institutions and markets in order to strengthen market discipline. let me comment briefly on these three issues. basel ii, the new capital framework for credit institutions, was initiated long before the outbreak of the financial crisis. by tailoring capital requirements more precisely to the specific risk profile of the credit institutions, basel ii provides incentives to improve risk management. i regard it as essential that the capital framework be applied worldwide. nevertheless, the current financial market turmoil has once again highlighted that we have to continue working on increasing the capital requirements for complex securitisations and for credit risks in the trading book. as you are certainly aware, however, the recent events have raised fundamental issues of regulation with regard to stabilising the financial system, not only in banking supervision and securitisation business, but also, say, in connection with hedge funds and, as an especially pressing issue, in the case of the rating agencies. in the united states, rating agencies have to be registered with the sec. furthermore, it should be borne in mind that basel ii relies on ratings for classifying the riskiness of bank loans. in europe there is therefore a procedure for authorising and mapping agencies'ratings in determining a bank ’ s minimum capital. following the experience with ratings in the recent financial crisis, the current practice of having only a non - binding iosco code of conduct is generally perceived to be in need of reform. the rating agencies themselves are in the process of reviewing their internal procedures and rating methods. furthermore, the european commission has now put forward a proposal for consultation which envis