 We will now continue in the program and come to our first panel entitled Banking Sector Turbulences Lessons Learned from Supervision and Regulation Before I hand over to the chair of the panel, let me remind the audience that after the discussion you can ask questions So there are two ways to do this Those who are participating via the Webex can raise their hand and ask the question directly once we call on you And those who are watching the live stream you can send the question via Mentimeter and you see it here in the slide And you will see the code and on the screen here, and you will also see the code later on Let me remind everyone please to identify yourself with name and affiliation. Otherwise, we will not take your question So with that out of the way, let me give the floor to the chair of the panel Pablo Hernández de Cos Governor of the Banco de España chair of the ESRB advisory technical committee and chair of the Basel committee on banking supervision The governor will introduce the panel members. So over to you governor Thank you. Thank you very much, Connie, and I hope that you can hear me well Good afternoon everybody and welcome to this first panel discussion of the seventh annual conference of the European systemic risk board Following up on class remarks, this panel will focus on the banking sector turmoil and all the lessons that we have learned from this experience During the next hour or so, we will be taking stock of these lessons both from a regulatory and supervisory point of view And we will reflect on the avenues identified to help strengthen the banking framework in order to minimize the changes But also the severity of such episodes happening again in the future The events of March 2023 can be regarded as the most significant system-wide banking stress since the great financial crisis Over just 11 days from 8 to 19 March, four banks with total assets of about 900 billion US dollars Were shut down, put into receivership or rescued This was followed by the failure of a fifth bank with roughly 230 billion US dollars of assets on the 1st of May This bank failures triggered a broader crisis of confidence in the resilience of banks and banking systems In response, large-scale public support measures were deployed by some jurisdictions to mitigate the impact of the stress The stabilization of the banking system was achieved thanks to a combination of public support measures and increased resilience provided by post-global financial crisis regulatory reforms, most notably Basel III In the wake of these events, the Basel Committee on Banking Supervision, which I have the honour to chair, conducted a stocktake of the regulatory and supervisory implications of these developments with a view to learning lessons This report was published in early October and I will just highlight now the three main messages that you can draw from this report First, the most important source of financial and operational resilience comes from banks' own risk management practices and governance arrangements Second, the banking turmoil highlighted the importance of a strong and effective supervision across various dimensions Including the ability and willingness of supervisors not just to actively identify weaknesses in banks, but also to take and enforce prompt actions The need to ensure supervisory teams have the appropriate quantity and quality of resources The need to more continuously monitor exogenous and structural changes to the banking system and adapt supervisory approaches to vaccine risk especially for banks that are rapidly growing in size or adopting novel business models and maintaining effectively and timely cross-border supervisory cooperation across a wide network And third, the importance of prudent regulatory standards, in particular the importance of a full, consistent and timely implementation of Basel standards The importance of a robust design and calibration of global standards for international active banks The need for robust and rigorous pillar two approaches pursued as complements and not substitutes to pillar one requirements The potential for banks that are deemed to be not internationally active in a jurisdiction to pose cross-border financial stability risk including through indirect contingent channels and the need for proportionate regulatory frameworks to reflect the expectations set out in the Basel core principles that any proportionate approaches are commensurate with the banks' risk profile and systemic importance The Basel committee intends to follow the report with three broad initiatives First, it will prioritise work to strengthen supervisory effectiveness including identifying issues that could make additional guidance at a global level Second, additional follow-up and medical work will be pursued based on empirical evidence to assess whether specific features of the Basel framework perform as intended during the turmoil such as liquidity risk and interest-rate risk in the banking book and consider potential options over the medium term And third, the Basel committee will continue to coordinate with other global fora and standard-setting bodies on cross-cutting issues So with this background, I will stop here and I would like now to turn to the five distinguished panellists that accompany us today Michael Barr, Stephen Ciacchetti, Matthias the Battlepoint, Andrea Andrea and Martin Grumberg And although I'm sure that you know our colleagues, let me just try to introduce them briefly by a hypothetical order First, Michael Barr is governor and vice-chair for supervision at the Federal Reserve Board in Washington DC since 2022 Previously, he served as assistant secretary of the Treasury for financial institutions between 2009 and 2011 and later as dean of the University of Michigan's Gerald R. Ford School of Public Policy where he is only as Frank Murphy College professor of public policy and Roy F. and Jen Hanford-Profit professor of law Second, Stephen Ciacchetti, a professor of international economics at the Brandeis International Business School in the U.S. In the years following the global financial crisis, Stephen was at the bank for international settlements in Basel as economic advisor and head of his monetary and economic department In that capacity, he was involved in the regulatory reforms undertaken by the Basel Committee and the Financial Estability Board Stephen currently serves as chair of the ESRB's Advisory Scientific Committee Matthias the Battlepoint is professor at the University of Livre de Bruxelles He has been executive director at the National Bank of Belgium with the responsibility of a prudential and financial stability In that capacity, he has served as member of the supervisory board of the ECB and of the Basel Committee on Banking Supervision Matthias has published widely in the areas of contract theory, organization economics, banking and finance Andrea Andrea is the chair of the supervisory board of the European Central Bank A five-year long role he took over from Daniel Nui in 2019 and that he will complete at the end of this year Before that, he was the first chairman of the European Banking Authority An economist turned into a supervisor, if I may put it this way, Andrea has also served in various capacities at Banker Italia and the ECB throughout his career And then last but not least, Martin Grumber, chairman of the Federal Deposit Insurance Corporation An attorney by education, he has been at the helm of FDIC at different points in time over the last two decades He has retired to his long-standing career as the board of directors of FDIC, Martin served for many years as a senior staff member of the US Senate Committee on Banking, Housing and Urban Affairs So thank you all for kindly accepting the invitation to participate in today's panel and I would like now to first give the floor to Michael Michael, can you hear me? I cannot hear Michael, I don't know if it's only me Would you like me to start Pablo? Maybe, Stefan, then we'll try to solve the technical problems with Michael Thank you, thank you, Stefan Thank you very much, I have a few slides Let me start by thanking Francesco Mazzifero and Thomas Belton and Shirley Simmins-Nokka, the ESIB secretariat for organizing this wonderful program And including me in the panel And thank you, Governor Hernandez, for the gracious introduction Next slide please My comments today are based on work with a long-time collaborator, Kim Schoenholz And I will summarize these lessons that we draw from the recent turmoil in the form of what I'll call three precepts The first one is you're going to always bail them out The second one is supervision is never sufficient And the third one is that the social cost of bank equity funding is far cheaper than the private cost But before I discuss each of these, I'd like to just highlight an overarching principle that should guide financial supervision and regulation Which is that an ounce of prevention is worth a ton of remediation Given the frequency of costly crises acting before things turn bad is far cheaper than cleaning up the mess after they do Which is in fact the job of the Basel Committee, the Financial Stability Board and the ESRB Prevention means that regulators have to limit incentives for risk taking while also requiring that institutions build shock absorbers to ensure resilience In practice, this means high capital and liquidity requirements And I would argue much higher than we have now Next slide please So turning to the precepts, lawmakers and regulators have been trying for years to set up a system where they can credibly commit to not bail out intermediaries that might pose a systemic threat These attempts run up against what I feel is an insurmountable time consistency problem And as a result, they've failed in the past and they're going to continue to fail To understand the challenge, reflect on what you would do if confronted with the choice between either bailing out a bank or a set of banks Or risking a crisis that threatens the payment system or undermines the supply of credit to healthy borrowers I submit that most of us, if not all, would do exactly what has happened every time in the past Which is not to be remembered as the parent of the next financial crisis and bail them out This lack of tolerance for risk of crises was on display earlier both in the US and in Switzerland Put simply, the time consistency problem challenge undermines the credibility of promises not to bail out institutions that conceivably pose a systemic threat The solution to this problem is high capital and liquidity requirements in combination with timely early resolution Next slide please Now, supervision is extremely important and I agree with everything that Governor Hernandez-Tacos said But in light of the US experience this year, I think it does need to be greatly improved This is one of the key lessons of the bar report on the SBB and signature and later First Republic problems Now, but just as we need and in this case, the point is that just as we need enforcement of highway speed limits, we do need authorities to enforce financial rules Institutions and markets are not going to do this on their own But to ensure resilience of the financial system, I think that the question is what is it that supervisors should do and what are the limitations Now, first of all, and what they should do is to impose stress tests that are rigorous, flexible and where appropriate transparent These tests should anticipate spillovers and assess the capacity of capital and liquidity buffers to cushion shocks But unfortunately, this is not going to be sufficient and the reason is that private incentives to evade the rules and conceal risk taking are And we're always going to be irresistible Facing high information costs, supervisors will find it difficult to detect risky behavior And even when they do, authorities must overcome a high burden of proof So they will be cautious about requiring timely remedies, let alone imposing penalties I want to be clear, this isn't about individuals, it's not about people being good or bad at their jobs It's actually built into the way in which supervision actually works But the point here is that the caution that there is in imposing remedies and penalties rewards risk taking And knowing that the enforcement is difficult, people are more likely to take risks Finally, different supervisors have different and changing tolerance for certain types of risk taking This is just a fact of the way that people are And the fact that they'll be replaced potentially by somebody weaker than they, that their successors will not have the same tolerances for risk Or be more tolerant for risk, weakens the credibility of any individual promise to sustain strict regulation Here I have to quote Paul Tucker, the former deputy governor of the Bank of England Who said that the history of bank regulation in the United States is a progressive delusions of core regulatory requirements Over a number of years, leaving the banking system as a whole vulnerable to crisis The best way to counter these inevitable shortfalls of supervision And this backsliding is to make capital and liquidity requirements sufficiently rigorous These tools both address the incentives to take risk and build in cushions against shocks Should the risks nevertheless become too large Could I have the next slide please? This brings me to the final precept The model Yanni Miller theorem teaches us that the value of a firm is independent of its capital structure The net present value of cash flows does not change with the method of financing Now when the theorem holds, the marginal cost of equity funding is exactly the same as it is for any other source of funds Now in practice though, there are some important failures The two most important failures of the theorem are distortions arising from taxation and bankruptcy The differential tax treatment of debt and equity, finance and a lot of jurisdictions leads to a preference for debt Importantly however, the tax-induced preference creates a private cost of issuing equity, not a social cost Bankruptcy of course is far more pernicious, the idea of limited liability Because owners get the upside of any bet, but the extreme downside belongs to banks, counter parties and to the government For that reason, equity is an option that rises in value with leverage As a result, the bankruptcy distortion is particularly powerful in the case of financial firms Which are far more leveraged than non-financial firms And again though, this creates a private, not a social cost So while bankers are correct to say that equity financing is privately expensive, social costs are clearly far lower I should also emphasize that people who create externalities are always going to complain if they're forced to bear the costs No polluter is going to voluntarily bear the costs of the pollution that they're imposing on others This means that if bankers don't complain about being forced to internalize the costs of preventing a systemic crisis Then regulators are not being tough enough, they have to complain So how high should capital requirements be? This is a very difficult question and one that I think involves balancing social costs and benefits But I will say that I think that we're nowhere near the level that we need to be Now, let me add something that's related to some comments that Governor Hondas de Coz made And that Governor Cnaught made in his introductory remarks And that is that we desperately need to examine accounting rules to ensure that we measure capital properly in a crisis Now specifically, I believe supervisors should shift towards mark-to-market accounting for marketable assets that banks hold And authorities can then use that capital calculation to make decisions about putting banks into resolution Shutting them down preemptively based on mark-to-market calculations Now, unlike capital and liquidity requirements, timely resolution is key for limiting risk-taking Belated resolution just encourages gambling for redemption Could I have the final slide please? Now to wrap up, I draw the following conclusions from these three precepts First, regulations should be more rule-based, less reliant on supervisory insight and discretion It should be simpler and more transparent, making gaming less likely And it should be stricter and more rigorous, again making it harder to hide risk-taking In practice, this means substantially more capital and liquidity It means shifting to mark-to-market accounting and it means improving the severity, flexibility and transparency of both capital and liquidity stress tests Thank you for the opportunity to participate in this extremely interesting panel and I look forward to the discussion Thank you. Thank you very much, Steve So let's now try to move to Michael Barr Michael, are you connecting now? Yes, I am. Thank you. We're having a bit of technical difficulty, but we found a workaround So it's lovely to join you all. Sorry to be joining you a minute or two late I thought I would just take a couple minutes to talk about the bank stress that we experienced this spring Some lessons learned from it and a bit about our capital proposal Here in the United States, starting in 2022, the FOMC began a period of rapid and substantial increases in the federal funds rate In order to combat inflation, it was much too high While most banks were well positioned to handle rate increases, higher interest rates had a severe effect on the balance sheet of banks Then had not managed their interest rate risk appropriately And some of those institutions also had not managed liquidity risk appropriately And that combination was quite deadly With respect to Silicon Valley Bank, the mismanagement of liquidity risk and interest rate risk came into acute focus When SVB announced that it had realized a large loss from the sale of securities that had declined in value And that it intended to raise capital to fill that hole Uninsured depositors looked at the balance sheet of SVB and decided it was insolvent They abruptly ran on the bank with actual and planned flight totaling roughly 85% of its deposits in less than 24 hours And it effectively failed instantly SVB's failure caused widespread contagion that led quickly to the failure of signature bank and eventually to the failure of First Republic Bank And it posed acute stress on many other banks in the system The stress abated after invocation of the systemic risk exception that permitted the FDIC to protect all depositors Including uninsured depositors of the failed banks And the creation of the bank term funding program using the Fed's emergency lending facilities The BTFP allowed banks to get access to Fed liquidity based on the par value of their high quality securities at fixed rates for up to a year This response helped calm conditions in the banking sector, deposit flows returned to normal And the prospect of widespread and acute bank credit contraction receded We continue to watch closely how both monetary policy and the effects of the March banking stress are affecting bank behavior and the provision of credit to the economy Recent data are consistent with pressure on banks easing relative to March Nevertheless, although deposit volatility has abated, some banks have had to turn to higher cost funding to make up for lost deposits A number of banks continue to have significant reliance on uninsured deposits Moreover, a number of banks continue to have unrealized losses on assets resulting from the rise in long-term interest rates We're supervising these conditions closely and we're also considering whether guidance and regulations are appropriate relative to what we have experienced One thing that surprised me in the United States is the lack of preparedness to use backup funding sources Including one of our oldest tools, the discount window Even firms that had established borrowing arrangements and had some collateral prepositioned were not as prepared as they needed to be When they saw a sharp and rapid outflow of uninsured deposits As we continue to look at how we can enhance our own operations, we're also emphasizing to firms the importance of preparedness to tap contingency funding sources Which means prepositioning collateral and testing at regular intervals Spillows from the March banking stress to euro area banks were relatively limited, thanks to a few key factors First, large and medium-sized euro area banks held a smaller share of their assets and debt securities compared to US banks of similar size As a result, unrealized losses in euro area bank securities portfolios are more moderate Second, bank deposits have proven stickier in the euro area than in the United States amid rising interest rates While a significant share of US deposits have shifted into US money market funds and therefore caused a higher increase in deposit betas Deposit outflows from the area banking sector have been more moderate But the importance of international coordination was highlighted by the experience with Credit Suisse Following the financial crisis, the global regulators put important reforms in place that made banks more resilient Though additional loss absorbency through stronger capital and liquidity requirements and total loss absorbing capacity requirements Were not enough obviously to prevent Credit Suisse from failing They did result in a significant slowing of the process of that failure which gave regulators time to manage its resolvability These reforms made banks overall more resilient and good progress was made towards making banks more resolvable Global regulators have built strong relationships which were very helpful in Credit Suisse's case and will be helpful in navigating stress in the future Let me turn briefly to our capital proposal In July the US Federal Banking Agency is issued a proposed rule that implements the final components of the Basel III agreement Our proposal would take important steps towards aligning better capital requirements with risk Both for the specific risks in play this spring and for a much broader set of risks that banks face Strong capital helps to ensure that banks can support the economy in good times and in bad And this rule proposal is a significant milestone to help our capital requirements evolve in response to changes in the financial systems The proposal would revise the regulatory capital framework in several main areas To enhance consistency and robustness of requirements, the proposal would remove the internal ratings based approach from the US regulatory framework for credit And implement a more risk sensitive standardized approach for credit risk and credit valuation adjustment risk The proposal would adopt the Basel III operational risk standardized approach with the internal loss multiplier which would be floored at one The proposed market risk framework is consistent with the Basel Committee's fundamental review of the trading book Additionally, the proposal would apply requirements consistent with the Basel III reforms to all banking organizations With a hundred billion or more in total assets This would be an expansion of the set of firms to which we apply our most stringent and risk sensitive capital requirements consistent with the Basel standards With respect to implementation, we have proposed a July 2025 implementation date with a three year phase in proposal ending on July 1st, 2028 We are in the middle of a comment period, we are accepting comments on the proposal Welcome all comments that could help us improve the rule And with that, let me turn things back over to you Pablo Thank you, thank you very much Michael Okay, let's now move back to Europe and we start with Andrea, please Getting there, hopefully Yes, I can hear you, I cannot see you Andrea No, the video is not there, let me check Yeah, also the video should be there now, sorry Okay, so let me start Thanks a lot for having me here today I will try to focus in my remarks to start at least by focusing on the market dynamics that we see unleashed at the moment of market turmoil So when one or more banks go underwater So I would like to look a bit first to the mechanics of contagion So what we have seen at play is during the spring is that there was an immediate search for the next week link And investors market participants switch very fast from a sort of balance sheet view on the banks to a market view on their resilience So basically while in good times, investors tend to look at the same indicators we look at, the capital ratios, liquidity ratios, asset quality, PNL metrics In a moment of turmoil, there is definitely a strong focus on a market to market view Which means immediate focus on unrealized losses, especially at the time as it was the case And it is still the case at the time of increasing interest rates and business model sustainability So the profit generation, the medium term profit generation capability of a bank as reflected in the equity market valuations So in this situation it may well happen that the bank which shows relatively satisfactory capital metrics and respects broadly all the regulatory requirements becomes a target And what we see building up is that adverse positions are built in CDS and equity markets CDS markets being particularly liquid and opaque and leading the charge and triggering also adjustments in equity markets And as the CDS spreads widen and the equity prices fall, we see that uninsured depositors start withdrawing their deposits So especially institutional treasures, corporate treasures use CDS spreads and equity prices as triggers for deposit withdrawals And this creates a very destructive dynamic So that's something which is at play and we have seen it at play during the spring So we have been thinking a bit how we should which type of lessons we should draw from these type of dynamics as supervisors as regulators The first point on which I would like to which I share also with Steven Ciccetti is that we should try to have a broader use of market metrics in supervision So the scope of market account should be broadened I've said repeatedly that it doesn't make a lot of sense to me that we have the liquidity requirements set for buffers to be used in times of stress And sometimes the assets to comply with these requirements are slotted in the health to collect So I'm not market to market. They should be ready to be sold at short notice And I think that I wouldn't say I don't think it's wise maybe to consider these market to market metrics in regulatory requirements But supervisors should increase engagement if banks show high amounts of unalised losses or depressed market valuation and start seeing how to improve the situation ahead of troubles The second type of lessons is that you need to focus more on diversification of funding sources We have seen cases of overreliance on particularly flighty sources of funding And after 10 years of course in which we have enjoyed a very relaxed liquidity situation for our banks And now we need to put more attention to that And I would also like to mention this was a point raised also by Michael that banks should be ready to access central banking facilities and get the liquidity they need at short notice So prepositioning of collateral is an important issue on which we are now trying to focus our banks' attention There is also this proposal made by Mervin King of covering a quite large portion at least of at least the flightiest part of the deposits with prepositioned assets collateral pledged at the central bank And I think we should think about something in that direction Now on the point raised by Steven do we need higher capital requirements? Now I've always been a bit of a hardliner on capital requirements and favouring a high calibration of capital and I fully agree with this point that there is a strong divide between the social cost of bank equity and the private cost of bank equity And also the arguments by the industry that higher capital requirements would kill growth jobs I never bought into that Still I think that we had a calibration in the Basel committee we have now a new package which we are all now engaged in implemented national level The new level of capital will be much higher than before the great financial crisis will be higher also than the levels that we have right now So I think we should focus on the implementation of this package right now and avoid reopening probably what would be not a very fruitful conversation at this stage I think I have more faith instead on what we can do in terms of improving the effectiveness of supervision Here I think that in general we are being very effective as supervisors when we have very easily quantifiable targets and that we set for banks with a clear timeline to get there So we did that with capital requirements we did it with asset quality so with non-performing loans ratio We are less good and understandably less good and that's the challenge for me when the issue which is broken and needs remediation in the banks is the internal governance is the sustainability of the business model Here it is difficult for us as supervisors to intervene because that's of course the area which management boards typically consider their own remit And something which it is not always easy for us as supervisors to step in and take direct control and tell banks what to do So that's an area where we will need to reflect further There is an interesting paper issued by the IMF on good supervision that gives suggestions on how to be more effective in identifying shortcomings, timeline for escalation and being more effective I think we need to focus our efforts in that area Very quickly two final points I want to raise also with reference to lessons from the spring events The first one is the CDS market it is as I mentioned before very opaque and illiquid and it can be a playing important role in triggering this type of very disruptive dynamics that I mentioned before Sometimes even authorities do not have visibility on the transactions that are occurring in this market you can see the transactions that occur in your own domestic market but not transactions which are being performed in other financial market places So I think that here there could be some leeway for work at the international level to strengthen the working and the monitoring and the transparency of this market The second point that was in particular related to the case of craze swiss is the functioning of the additional tier one market now In the case of craze swiss I think that rightly these instruments have been bailed in now these instruments were supposed to absorb losses in going concern So it's a good result that they were brought in and written down to absorb losses and restore viability at the bank But the specific contractual features in the swiss environment which were basically the supervisory triggers which enable the authority to write them down without entering into resolution or having a contractual trigger hit And the permanent write down features imply that basically 81 holders were worse off than equity holders which basically created the impression in markets that 81 is now junior to equity And this created disruptions also in markets in which these instruments have different contractual features like the European Union Now the market has started again to function also in the euro area But I think Pablo that it would be good if the Basel committee could in future think further on some standardization of contrast in these areas These instruments are important for absorbing losses Having some common features I think would be beneficial to avoid that there is this sort of contagion between different instruments So that everybody understands how they work in times of stress and I will leave it here. Thank you very much for your attention Thank you. Thank you very much Andrea and yes I can guarantee you that this is in the least this last point on the treatment of 81 I see it was also incorporated into the report that we published a few weeks ago Okay, so let's now move to Martin, Martin Grumberg again back to the US. Martin please Pablo, thank you very much and I say it's a real privilege for me to participate in this program and with my fellow panelists and very much appreciated hearing their comments I'd like to take the opportunity today to make a few key points on the lessons learned from the failure of the three large regional banks in the United States Earlier this year there'll be some overlap with the comments Michael made I think but also some additional points so hopefully it'll be useful And I also wanted to briefly comment on the conclusions reached in regard to the failure of Credit Suisse by the FSB's report on lessons learned from the resolution of the 2023 bank failures which I think has large implications for the resolution of systemic financial institution so but let me start if I may with the US bank failures At bottom I think we learned at least one big thing from the failure of the three banks in the United States earlier this year and that lesson was that regional banks as small as $100 billion can in a given set of circumstances pose genuine and significant financial stability risks and while we might have suspected that in the past I think we actually now had a demonstrated experience with it that I think will impact both our supervision of these institutions going forward and our approach to the resolution of institutions down into the regional bank space in the United States As Michael pointed out the failure of Silicon Valley bank to manage the risks of rising interest rates of the accumulation of unrealized losses on securities held on the balance sheet of the bank with with no hedging of that interest rate risk and the 90% reliance of the bank on uninsured deposits for funding made that bank vulnerable to an unprecedentedly fast liquidity run and the failure of Silicon Valley in turn created a powerful contagion effect that caused the failure clearly of two other large regional banks that were also heavily dependent on uninsured deposits for funding a signature bank in First Republic and put significant stress on the rest of the system particularly the regional bank sector and the failures of Silicon Valley and signature bank posed such a risk to financial stability that the Federal Reserve and the FDIC together with the Treasury Secretary in consultation with the President exercised what we all is systemic risk exception that's available under the law to protect the uninsured depositors at the first two bank failures Silicon Valley Bank and and signature and to exercise that authority for institutions of this size 200 billion in the case of Silicon Valley 100 billion in the case of signature was really an extraordinary statement in regard to the financial stability risks that institutions even of this size can cause I would note and I think this is important to recognize that even though the uninsured depositors were protected these institutions were allowed to fail they were placed into resolution their investors were wiped out their creditors took losses in you know in accordance with the losses of the institution the boards and management of both institutions were removed and the FDIC is undertaking investigations of the conduct of the boards and management as we are required to do under the law so there was accountability here but also an extraordinary exercise of public authority to protect the uninsured depositors because of the contagion effect that the responsible authorities I think were quite unanimous in believing that a genuine financial stability risk was posed I do think the combination of exercising that systemic risk exception and the subsequent orderly failure of the three of the first two and then a third bank first republic and then the sale of those institutions rapidly to credible healthy institutions combined with the Fed's establishment of the liquidity facility that Michael referenced I do think those actions have helped stabilize the system and we've had a no repetition of the events of earlier this spring and a genuine general stabilizing of market conditions although I think the banking system in the United States remains quite fragile with underlying vulnerabilities relating to unrealized losses on securities and loans concentrations of uninsured deposits and still very substantial exposures to commercial real estate particularly for banks in the United States under $100 billion and in a high interest rate environment with an uncertain economic outlook that creates significant downside risk for the banking system still I think the conclusion that the US banking agencies reached in terms of responses to the lessons learned from these three bank failures I think we're very much in alignment and are moving together to learn from those failures and to take both supervisory and regulatory actions to address the vulnerabilities that were revealed and on the supervisory end I think all three of the US agencies, the Federal Reserve, the OCC and the FDIC, are moving together to learn from those failures and to take both supervisory and regulatory actions to address the vulnerabilities that were revealed and on the supervisory end I think all three of the US agencies, the Federal Reserve, the OCC and the FDIC are providing guidance to our examiners focused on interest rate risk management, unrealized loss concentrations and securities and loans, reliance on uninsured deposits, rapid growth which was a factor in all of three of the bank failures in the United States. Silicon Valley bank tripled in size in two years, signature bank doubled in size in a two year period, and then very importantly and I think this was noted in the report that the Basel Committee released, the importance that when an institution is experiencing difficulty and it is not responding to reasonable supervisory guidance, the importance of escalating supervisory attention to the institution and if necessary to compel compliance by the institution if it's not being responsive to reasonable supervisory guidance and I think that was really a key supervisory lesson from these failures. On the regulatory side, three key regulatory measures to focus on two of which the US agencies have already begun to act on. And as you well know in the proposed rulemaking on Basel 3 in the United States, one of the regulatory changes in the proposal would require recognition of unrealized losses unavailable for sale securities and bank capital. If that had been the case for Silicon Valley, it would have been most beneficial. And in addition, the three US banking agencies have already acted on a proposed rulemaking to require regional banks in the United States down to $100 billion in assets to hold a buffer of long term debt to serve as loss absorbing capacity in resolution. That long term debt would take losses ahead of uninsured deposits that might reduce the incentive for uninsured depositors to run. And even if the bank ultimately fails, that long term debt would diminish the loss to our deposit insurance fund. And if that had been in place, we might have avoided the need for the systemic risk exception in the United States, which would have been very desirable. It was necessary, but it, you know, it was a departure from the least cost approach and creates a moral hazard issue that really calls upon us to take the supervisory and regulatory measures. The third area of regulatory change that I would underscore and that Michael referenced, and that we are, is prospective for the US agencies, is liquidity requirements. And I think we will be taking a close look at the liquidity coverage ratio, both its scope of application as well as its content. And we will also be looking at the issue that Michael raised in regard to pre positioning collateral at Federal Reserve banks in order to assure access of liquidity on a short term basis in a stress environment. So this is really a pretty robust agenda that we are in the process of implementing as a result of these three failures. And finally, let me just comment briefly on on Credit Suisse and the important resolution learn lessons. I think we need to learn from that episode. And in my capacity as chair of the resolution steering group of the FSB, I was deeply engaged in the FSB's lessons learned report that related to the Credit Suisse. failure. The core takeaway from the FSB review was that the extensive resolution planning work over the past 10 years. The availability of substantial loss absorbing resources for resolution at Credit Suisse. The collaboration that took place within the crisis management group for Credit Suisse in the months leading up to the failure. And the efforts of both the Swiss and host authorities to address remaining obstacles. And put the responsible authorities in a position to conduct a single point of entry resolution if if that path had been chosen. And the host authorities for Credit Suisse confirmed their readiness. And this was determined in the review to support the execution of a single point of entry resolution and their confidence that a single point of entry resolution could have been undertaken. And at the bottom line, the review reached the conclusion that the international resolution framework provided the Swiss authorities with an executable alternative to the solution that the Swiss authorities ultimately deemed preferable. In this particular case, which was that the path they chose was the facilitated merger of Credit Suisse and UBS. And while the FSB report identify several areas for further analysis and improvements in the operationalization and implementation of the GCIP resolution framework of the FSB. The review fundamentally upheld the appropriateness and feasibility of the framework and that the key attributes for resolution of the FSB remain valid. I thought that was an important set of conclusions for the report to reach. And that, Pablo, concludes my remarks and look forward to the discussion. Thank you. Thank you very much, Martin. And indeed, with this report that you were coordinating, I think we have a complete overview of what happened and the lessons learned and also the follow up for the future. Luckily enough, I think we have Matthias with us because he was able to solve the technical problems. So, Matthias, you have the floor. Matthias, you may be muted because we cannot hear you. Can you hear me now? No, yes. Please go ahead. Okay. Thank you. Thank you. Sorry for not being properly present and having had a lot of trouble connecting, but so thanks a lot for your patience. Of course, I haven't, I've just joined, so I haven't heard what has been said. So my apologies if I, if I repeat some things, but let me just say first that I'm very honored to be in this very high level panel. So thanks a lot for the invitation. And I thought I wanted to make four points, starting with a transatlantic comparison, given the events of last spring, as well as the panel composition, but then gradually focusing more on the Eurozone, since this is an ESRB country. So my, my first point is that of course, one should stress that the Eurozone did manage to avoid the Credit Suisse and the Silicon Valley Bank at all problems. And therefore the SSM and Andrea in particular should be warmly applauded for that. I think praise should also go for EU regulation, which applies Basel III rules to many more banks than in the US for example. For us, a $100 billion bank is very significant, as we say. We in fact go much below that threshold. And even the smallest banks have to respect or implementation of Basel III rules, which I think is quite impressive. Now, on the other hand, looking forward, I think we have to admit that our GSIBs do look more fragile than for example in the US. If one looks at market capitalization divided by total assets. So that for us, the Credit Suisse case is more relevant and worrisome for the future than the Silicon Valley Bank at all problems. So we do apply Basel III to all banks, but shouldn't we apply them more strictly? Isn't the EU still the only jurisdiction which is not Basel III compliant, which I find a bit embarrassing? And in particular aren't we too tolerant in allowing internal models to reduce capital requirements for some of our big banks? I think this is what the stock market is telling us and it may not be wrong. So that's my first point about implementing rules maybe more quickly. Now, my second point is that several observers have said that what we need is more supervisory effectiveness rather than more rules. For example, on capital or liquidity. And it is quite true that rules that look strict but aren't really, for example because accounting numbers move too slowly, can give a false sense of security so that the advantages put forward by academic economists in the 1970s of rules over discretion. In this case, in our case, rules over principles. I think this is worth reexamining since this false sense of security can be what supervisors and regulators called unintended consequences of some of these rules. On the other hand, rules are needed to give a legal basis for intervention. And I think one clear lesson of last spring is that the potential usefulness of strengthening the rules by including market indicators next to accounting ones is, I think, important. And in this sense, I understand that I do agree at least I think with what Stephen Chiquetti must have just said. Of course, given my first point about market caps, this will obviously have consequences for some of our big banks in the usual. Now, my third point is that it is indeed true that there is more than just capital and liquidity in supervision. And that sustainable governance and sustainable business models have been mentioned as worth having more tension. And my my first point here is to ask whether we shouldn't go back to the Lee Cannon report, which was making proposals to include some safeguards, structural safeguards for the universal banks. In the UK, they had the Vickers report and the ring fencing idea to put a to protect retail banking from risks emanating from the their investment banking activities. In the US, there was the Volcker rule. Are we fully confident about the business model of some of our biggest eurozone banks in this dimension? I do think that this topic deserves reexamination because very little has been done on this topic in the EU. On the other hand, as far as governance is concerned, the EU has innovated in capping variable remuneration of bank management to maximum 100% of fixed remuneration. And I do think that this idea has value, at least in terms of principles. You know, we are at a time where questions are raised much beyond banking about the excesses of shareholder value, making capitalism less efficient, less credible in our democracy, less legitimate. And I think it's quite strange to tolerate the preeminence of shareholder value in the banking sector because banks are firms with the highest leverage of all sectors of the economy. And with that comes the associated distortions in terms of so-called asset substitution put forward already by Jensen and Meckling in the 1970s. So I think it would be nice to take stock of the EU experience in this respect of remuneration and see to which extent this rule limiting variable remuneration has helped and how it could be improved in order to foster what we all like, which is safe and sound banking. Finally, my fourth point concerns resolution in the eurozone. It's always a challenge, especially for institutions across borders. In this respect, let's face it, Switzerland has been, shall I say, prudentially very lucky. We have had the domestic GSIB, UBS, able to take over KD3. I'm talking about the prudential authorities. I'm not taking necessarily about customers of banks that now face a huge, a huge single supplier. But you know, in the eurozone, four countries have only a single GSIB. And what if one of them needed a rescue? I think BRRD already has its shortcomings with its very inflexible 8% bailing rule, which makes resolution non-credible for all those banks that don't have 8% of subordinated emerald funding. I think the EU proposal CMDI, so crisis management deposit insurance, would clearly help. And like many, I hope it can be approved as soon as possible. But I think more is needed. Like, for example, of course, EDIS on deposit insurance, which would then allow for a fully integrated banking union, where I think we could then ask a host country to drop their national restrictions. And where we should also encourage home countries to allow foreign banks to build up market share. Because if you look at the top five countries of the eurozone, their share of banking assets that are not domestic is below 10% all of them. So I think the road is still long. We should not kid ourselves. It was striking, for example, that some years ago, when there were noises about the commercial bank in Germany needing a buyer, the Dutch GCB ING considered acquiring it. It didn't in the end, but it felt that it was useful to say that in this case, it would move its headquarter to Germany. So we are not yet in a world with European banks. We have national banks. And I think that one lesson of the GCB's case, and it's needing a buyer, is that moving faster to a true banking union is really needed. So thank you very much. Thank you. Thank you very much, Matthias. Very clear and structural points. And thank you also for focusing in the European Union, since we are in a ESB conference, as you were also emphasizing. I guess from the different interventions, one can say that the banking episodes experienced in spring in the US and Switzerland, were essentially the outcome of a fatal combination of vulnerability, stemming of risk mismanagement and unsustainable business models, as was also mentioned by several participants in certain institutions, against the backdrop of rising interest rates and to certain extent an expected increase in interest rates to fight against inflation. There are of course, and here there were also good common ground, important lessons for authorities on how to strengthen current regulation and supervision, both domestically and internationally, which of course we should take very seriously. And in this sense, I cannot more than agree with the conclusion about the importance of accomplishing a multifaceted response, including supervision regulation and of course also bank resolution. So it's true that there was a lot of common grounds, but there were also some nuances here and there. So maybe before receiving questions from the audience, perhaps we can have a new round of comments, just if you want to react to what you have heard from the other participants. And I will follow the same order starting with Steve. Steve, please. There were some issues on rules versus discretion. Well, I think the level of capital in the system, which well, there were some different views. Let me just start by thinking, I think there is actually quite a lot of agreement and some of the details we may not agree on, but that doesn't really matter much. The big picture, I think there's quite a bit of agreement. Let me just say that I understand that there's not much appetite for revisiting the issue of the level of capital that the Basel committees probably not going to do that. But fortunately, we're in a position where we know that liquidity requirements and capital requirements can be substitutes. And so in fact, if we can tighten liquidity requirements, then I think that we can actually make quite a lot of progress towards a number of the common goals that all of us have. And there I would also emphasize that the liquidity coverage ratio and the net stable funding ratio are also substitutes. So my own proposal for a long time has been to get rid of the net stable funding ratio is very complicated and difficult and just have a far better and much more rigorous liquidity coverage ratio. So I would encourage the Basel committee and other standard senators at the FSB and the national authorities to consider that. I do agree completely with what Chairman Gruber and Vice Chair Barr said about the importance of prepositioning of collateral for the possibility of borrowing from the central bank. I mean, I think this is an essential thing, but I think that there's some idiosyncrasies in the U.S. case that led to there being insufficient posting of or prepositioning of collateral at the Federal Reserve. And that's the existence of this very bizarre federal home loan bank system, which if I was in charge, we would find a way to get rid of entirely. But it surely would be useful to try and minimize the impact that that has because it seems to be encouraging risk taking. But beyond that, beyond that all I'll say is that I wish that we could have more capital. I'm realistic about the desire for that. I accept that if we can have more loss absorbing capacity in the banks that isn't necessarily equity per se that that would be useful. But I would just warn that by having more subordinated debt, we do have to concern ourselves with what that does to the incentive of people to have uninsured deposits. We don't want to have more subordinated debt that then just simply leads to people having more uninsured deposits. Presumably people are equating the risks at the margin. And so we have to be very careful about how that's done. But I think otherwise, as I said, I think we largely agree. Thank you very much. Thank you, Steve. Well, on capital, Steve, you know that the models, the theoretical models provide a very ample range of optimal levels of capital. And what I can say is that at least the calibration in Basel is within the range. So I hope that this helps. So let's follow them with Mike. Mike, please. Thanks very much, Pablo. I very much enjoyed the panel discussion. I do think that there is quite a lot of area of commonality. And maybe just echoing a little bit what what Steven just said that I do think it's important that we have robust capital in the banking system. It really is the first line of defense for the kind of financial stress against the kind of financial stress that we saw in the spring. The Basel 3 end game proposal would increase capital in the banking system. As Pablo said, it's within the range of what people think of as optimal work currently at the lower end of that range. There is certainly quite a way that movement could be had that would improve outcomes. I do also think that we need to continue to focus on liquidity in the system, the prepositioning of collateral with respect to discount window access, thinking about this relationship between the assets held on the balance sheet and whether they're monetizable in appropriate time frames and also exploring the liquidity coverage ratio to make sure that it's appropriate. I think there is work to do on the liquidity front. That is, as Chair Grunberg mentioned, also the importance of having additional loss absorbing capacity in the form of long term debt for our largest banks that are not GSIBs. And we have a proposal out on that I think that will be quite helpful and would have been helpful if we had it in place in the spring in terms of perhaps reducing the incentives to run and providing more flexibility to the resolution of these entities as they got into trouble. So I do think there's progress to be had here. And last, and let me just pick up on the theme again that both Martin and Andreas mentioned, and that's the importance of international collaboration. I have found on a personal level that international collaboration absolutely critical in the 15 months or so I've been on the job. Both in understanding risks as they arise across the financial system and in helping to ensure that spillovers can be muted that coordination can happen across the system. So I'm grateful to my colleagues for that. And I look forward to continued collaboration. Thank you very much, Pablo. Thank you. Thank you, Mike. And thank you in particular for emphasizing this last point on the need, the importance, the criticality of having international collaboration. So let's now move to Andrea. Well, Andrea, there were many comments that you may want to react, but perhaps if I may. This point that was made by Matias on the fragility of the European GCPs as compared to GCPs in other jurisdictions. What are your views on that? And of course, you can comment on whatever you want to. Thank you. Thank you very much. When you look at the it is true, know that I mean we are doing also with our, you know, fellow, our colleagues in other jurisdictions sort of comparison so where our banks stand in terms of capital requirements and the like. And let's say yes, it's true that if you compare, for instance, the European GCPs with the US GCPs, the level of the capital requirements are higher for for US GCPs. If you look at the actual levels of capital risk-weighted, of course, banks in the GCPs in the EU have higher buffers above the minimum requirements. The GCPs in the US operate closer to the requirements. Now, why is that? And that's the point that Matias is raising. The point is valuations. Now, I mean, if you have high valuations like the GCPs in the US, of course, you can tap the market and raise capital without much difficulty. If you have a price to book ratio in the region of 50, 60 percent or even lower, then of course, the access to capital markets is much more difficult and banks tend to operate with additional buffers on top of that. So, all in all, the key point is what drives the low valuations of European banks, I think. And they would like to say that it is, as Matias was saying, the non-compliance with Basel or the reliance on internal models, because this would mean that markets would look quite closely at things in the same way as we do, Pablo. But I must say that talking to investors and market analysts, they usually argue that our banks are not profitable enough, so that they have a structurally low profitability for a very long period of time. And they are not convinced that also the flare in profitability of the last year linked to the increase in interest rates is sustainable. And so this issue is still bringing the valuations down. Now, I would have many other topics that I would like to touch, but I don't want to spoil. Maybe a few very, two very fast. Liquidity, let's say, if we were to move to market to market of all the liquidity buffers, I think that we would make already a major improvement in the metrics that we use for liquidity supervision. And we would also push the banks to mismatch more actively their exposures to, for instance, sovereigns and potential widening of sovereign spreads here in Europe. We are always entering into these difficult debate or regulatory treatment of sovereign exposures. If you did that, you would go a long way into pushing banks to proactively manage their liquidity profile and their exposures in their securities portfolios. Second point, I agree with Matias that CMDI is a crucial package. I think that the weak point in the Euro area is mainly our crisis management framework. We need more optionality, more flexibility to take actions as the FDAC can do in the US. So to use the post guarantee scheme, the resolution fund in a more proactive way to finance on a least cost basis solutions to bank crisis. So that's an area where we could make improvements. Of course, this would be the dream solution. It will take time. The dream outcome is that, you know, suppose that we get into a political agreement sooner rather than later. Still, it will be a long period of time until we get there. My point is that we cannot wait for integration in the European markets. There are tools that enable banks to work in a less national mindset already now. For instance, by using branches, we could widen a bit the use of waivers with sufficient safeguards. I can talk for ages on that, but let's say there are tools that could enable to have more European banking sector already now, I think. Thank you. Thank you. Thank you, Andrea. I guess it's a pity that we have to accept that the lack of integration in the European market will remain. Also, because it might be this is also conditioning the profitability of our banks, both in the short and medium and low run. So this is an issue in which we should work in the following years or at least not forget it. This is absolutely crucial. Okay, so let's now move to Martin. Martin, please. Thank you, Pablo. I guess I'm struck as a general matter of the alignment among among the panelists here, sort of on the core issues of strengthening the resilience of the banking system, the importance of enhanced capital, liquidity, resolution capabilities and strengthened supervision of key risk areas. I think and I think it's generally reflective of the what I would call the post crisis international effort relating to financial stability across the major jurisdictions, which I think is as you indicated isn't really an underappreciated advance that we've made the level of engagement across jurisdictions through the international groups or bilaterally is in a very different place today than it was pre 2008 to the enormous benefit of the system. And even in the case of Credit Suisse, for example, where we didn't actually utilize the resolution framework, the cross border collaboration that took place prior to the to the to the action on Credit Suisse I think contributed significantly to containing the financial stability risk of the of the transfer. A couple of points responding to Steve and to on Andreas. On the pre positioning of collateral and the role of the Federal Reserve Banks versus the home loan banks in the United States I think the banking agencies and the regulator of the Federal Home Loan Banks in the United States the Federal Housing Finance Agency which I'm sure Steve is aware of recently within the last week released a report expressing concern about relying on home loan banks as a lender of last resort in a stress environment for short term liquidity. And the experiences that are just really not reliable in that regard they may have a role in medium and longer term liquidity in a normal environment but in a stress environment on a short term basis. The reliance and the capability really needs to be focused on the discount window and and removing any stigma for institutions to utilize that and I think that's going to be a focus of attention for us going forward in thinking about the the liquidity issue and on the relationship between long term debt and uninsured deposits I very much agree with Steve. We don't want more uninsured deposits we want less uninsured deposits quite frankly in terms of concentrations. I think we're going to be looking to address that as a supervisory matter and also I think the expectation is in the assuming we move forward on a long term debt rule in the regional bank space. Long term debt will take the place of some of the uninsured deposits on the balance sheets of these institutions which would have multiple multiple benefits. And then finally a point both Steven and Andreas made. I have some appreciation of the internal difficulties completing the third leg of the European banking union in regard to a European deposit insurance scheme but for multiple reasons it would really strengthen the resilience of the system I think. So even if it's a longer term challenge just as from an outsider perspective. I hope people stick with it because I think it would be in your interest and frankly ultimately in our interest in terms of a more stable and resilient global financial system. Thank you Pablo. Thank you. Thank you very much Martin. Matias I don't know whether you want to react since you were not listening to most of the initial interventions but please if you want to say anything. Well thank you. You hear me. Yes perfectly. Yes. Well thanks a lot. I mean from all these reactions I'm really sorry that I missed the first part. I will try and look at it afterwards on the web but there was only this one comment of Andrea about integration. And I I've always felt found it surprising that banks have some banks have worried so much about about lack of integration while indeed the branches is an easy way to go. And I'm a bit surprised that they don't do that more but there must be there must be some reason in any case indeed anything that can be done. I really agree that the dream of an integrated market is will take some time and as everybody anything that can approach us there as possible would be great. Thank you. Thank you. Thank you very much Matias. So let's now I think we have still 10 minutes. So we can collect some questions from the audience and Connie will manage the Q&A please Connie. Thank you very much. Thank you all for your for your great discussion here and let's continue it. We have a few questions from the audience. So I have one on WebEx from Enrico Perotti. He's professor at University of Amsterdam and an ESRB advisory scientific committee member. And I think why we'll patch you in to ask your question directly to the panel. We can also collect the next question maybe and and you can think about it already and Pablo you can think on who to give this question to is from Antonio Sanchez Serrano. He's from the ESRB Secretariat and his question is how could we enhance collaboration in data sharing among authorities globally in markets such as the CDS market as mentioned by chair and Ria. So can we have maybe is the professor online. Yes. Thank you. Please go ahead. So I was very impressed by the panel the strength of the position the convergence. I think I'm also shared a concern about the ability to adjust the buffers soon enough or to complete some of the framework we need. I think on the cap the buff is always very hard the liquidity buffer. Well before we ever get anything close to what Mervyn King was saying we are very far. So I think we there is something else that we could do given the brutal experience of find ourselves again at the mercy of runs that we have just days to respond. We spent a lot of time thinking of buffers before and who pays afterwards. But it's something more that we can do in the resolution framework. And I think this goes along the way of Andrea's comment on strengthening supervision. There is something that people are too can do can be enhanced to do in a preventive fashion as a going concern fashion. And here again I think the Swiss experience is important because the Swiss had been for 10 years very clear didn't want public money to be spent on their banks. And they succeeded. And the goal was not just adequate capital but also a very strong regulatory trigger. To be frank is is exactly where European legislation misses. There's been absolutely no formal going concern conversion in European cocoa, which are quite a lot. Because all of that being converted default. Not even a coupon has ever been suspended. So we have an ineffectual capacity to prevent moving time on a pillar to measures on sort of shielding the bank from potential distress ahead. What we need is a reform that will give Peter to authority clear legal rise to convert some instrument upon of course an adequate stress testing because ultimately the bank would have to be the clear solvent but under capitalized. And without that the resolution just a question or winds up paying. I think there are also other measures that could be envision as opposed to just have buffers and bailouts at the intermediate stage and that includes some proposal and potentially making it difficult for corporate deposits to withdraw all of them at once. That would mirror some of the proposals that have been adopted in the money market fund which are actually the type of institution where traditionally corporate deposits have been placed. I would welcome comments on that. Thank you very much. Thank you. Thank you, Rico. I don't know who wants to to react. Andrea. Yeah, no, again, as I said, no, we need to have a little bit of harmonization in the in this in this area. I personally think for instance the calibration of the minimum triggers for additional tier one is ridiculously low. No is five point two five percent. We know very well that banks will never reach that point so that that that's something that needs to be let's say probably recalibrated. The issue of the supervisory triggers is controversial. No, it's actually because if it is combined with permanent write down features, no, then it eventually means that additional tier one is perceived as is actually junior to equity. No, so they take losses while equity holders maintain their the value of their investment in the bank. In my view, if you start introducing those type of features, you at least you need to move to a temporary right down so that or a conversion even better. I would prefer the conversion actually so that basically once the bank is restored to viability, you know, basically the investors take the upside as well to some extent. So we need to think a bit about that. But in general, let's say I think that again, as I mentioned, what is crucial for me is to have really a sort of global setup because if you have differences, investors don't. And we always consider investors very sophisticated. But I mean, these contracts are as thick as the Bible. So nobody knows all the contractual features and there is easily transmission of tensions from one product to the other, although they're very different contractual features or standardizing a little bit more in my view, the write down features. And indeed, enhancing the law, the going concern loss of solvency features could be could be good in the longer term. Mostly my view, we need to have a neater distinction between what is going concern capital and what is going concern capital. Now probably stack is excess excessively complex now T like a tier two additional tier one common equity. So maybe in the longer term, having a simplification would help. Thank you. Is there any additional questions? I can make a quick comment. Thank you. So first of all, on on Antonio's question, I think that the original intention of the International Data Hub at the BIS was that there would be more cooperation and collaboration on and data sharing than there has been. It seems to have gotten somewhat stuck. But but that doesn't mean that it can't be unstuck. And so I would encourage I would encourage the Basel committee and the FSB to get together with the BIS and also with all the members to discuss the possibility of enhancing the data sharing that is going on there now because there is already a there's a mechanism for it. The question is whether or not people are willing to provide data which in the end is quite confidential and then share it in ways that would in fact be that would in fact be productive. As the person who signed all the MOUs at the at the BIS I can tell you I never saw one number. So so it's it's quite it's quite confidential in that sense. I think that you know that that I have a lot of sympathy for Enrico's comments. I think there that that many of these these are these are incredibly important points and Andreas reaction I think is is right. What I would say is that I want to see somebody actually trigger one of these beyond what happened in Switzerland. I agree completely Andreas point about that we should prefer conversion not actually zeroing these stuff out like what happened in the one case. But the question is whether anyone's ever going to actually have the wherewithal to trigger this stuff. And so far we haven't. So from the point of view of a from the point of view of an investor from the point of view of someone purchasing those bonds they look like pretty great pretty great investments. And I think we ought to think about doing something about that. So thank you. Thank you. Thank you, Steve. Also for giving me more work. The muscle committee. So I don't know whether we have Pablo. I don't know just one very quick point if I may. I had a discussion with DTCC on the exchange of information on CDS. No. And what they said is that now the agreements is that supervisors can access data DTCC in their own jurisdiction. But they would need something done at the global level to enable authorities in one jurisdiction to access data on transactions occurring in another jurisdiction. So that should be rather plain vanilla and may and already a great improvement on the on the status quo. So maybe we should see whether there is room for doing exactly that as Steven was in. Thank you. Thank you. Yes. So we have one other question online. So let me read it out from Thomas Pelton in from also from the ESRB as secretariat. We touched about on this issue already earlier in the in the discussion but maybe to dive a little deeper. The question is how should we think of the deposits as a source of bank funding given the events experienced during the spring? Should we adjust liquidity regulation and liquidity metrics like the liquidity coverage ratio to take into account the possibility that deposits can fly out from the bank very fast due to technology and social media? Over to you Pablo. Yeah. Yeah. Thank you. Thank you. But to a certain extent it was covered in the initial interventions. But maybe Matias or Mike. Yeah. Let me just say a brief reaction to that. I do think it's worth looking at all of our tools in the liquidity space. It may be that part of what we need to do is focus on this idea of preparedness and prepositioning of collateral because that's the speed. It sort of directly addresses the speed issue. Whereas the LCR is a one month measure. So it might make sense to think about those issues a bit differently. We of course also should look at whether the calibration of LCR is correct. What we've learned about the speed of deposit flows and how different kinds of deposits behave. We didn't we really didn't see movement of insured deposits and even among uninsured deposits different kinds of uninsured deposits behave differently. So I do think it it does make sense for us to take carefully think through this calibration question. Pablo I would just add to that that the least in the US experience. The behavior of insured deposits was very different from the uninsured deposits. Not only was there no loss of insured deposits insured deposits continue to grow through this. Oh, period. So I agree with Michael's point that we need to take a nuanced look in regards to both insured and uninsured deposits. We're going to go after this. OK, just one quick point. Really what Mike just said, and that is that the LCR calibration that we did was based on the 2008 experience. And so I think that we need we need to revisit that for sure. Yeah. OK, well, I think we have now to close this this panel. Let me just spend one minute to draw my own conclusions. I can say that we all agree that we have to work on strengthening supervision. That was mentioned, I think by everybody. Second point, we have also to to work on on assessing the effectiveness of some elements of the current regulation. And perhaps here the most urgent focus should be put on liquidity. Mainly because there are some developments, some new trends in particular, this velocity in the outflows of deposits that can condition what is optimal from the regulatory point of view. And it's important that we address them. Third point, let me, of course, also stress that we need to focus on implementing in full Basel 3. There are no arguments in what we have observed in the last six months. On the contrary, I would say that lead to a contrary conclusion from this. And of course, last point, we need to do this together at the international level. We need to keep and even enhance the international cooperation that we have built during the last 15 years. So let me just also spend 10 seconds to thank the panelists, my colleagues, for an excellent panel. Very good interventions. And of course, to all who were connected or listening and also for asking questions. Have a good day to all. And also, thank you very much. Thank you. Thank you everyone. Also, thank you very much on behalf of the ESRB and the ECB to the chair, of course, of the panel and the panel members for this discussion. So we have come to the end of our first panel.