The Basel Committee on Banking Supervision, which was formed in 1974, in the wake of the Herstatt incident25, has been setting the norms for banks’ capital adequacy, for instance, since the 1980s. With regard to financial legislation, harmonised regulations have long been drawn up for banks and other financial companies within the framework of the European Union. However, there is no doubt that the international cooperation has further intensified since the global financial crisis. The focus has more clearly been on a systemic perspective, or, if you will, a macroprudential policy perspective. After the crisis, it became a natural task for the Basel Committee to make a thorough review of the requirements with regard to capital and liquidity. The results of this review include the guidelines that are known as Basel III. The G20 countries’ reform agenda now includes, within the framework of the work conducted by the Financial Stability Board, special capital requirements for so-called  25  On 26 June 1974, the West German authorities revoked the Cologne-based Herstatt Bank’s licence to conduct banking activities. On that date, several banks released payments in D-mark to Herstatt Bank in Frankfurt, in exchange for US dollars, which were to be delivered in New York. A time lag arose between the different time zones, where operations ceased before the counterparts in New York had received their dollars. The Herstatt incident is a famous case that is often used as an example of so-called settlement risk.
I nevertheless think that one can draw some conclusions from these exercises: Firstly: Whatever the authorities do in terms of macroprudential policy measures, changes in fiscal policy or in monetary policy, it will affect the price of money in the economy, that is, loan costs, and thereby the incentives for indebtedness. This means that measures taken in one area must take into account what is being done in other areas. The one hand must be aware of what the other is doing, even if they are not completely coordinated. 10  BIS central bankers’ speeches  Secondly: It is clear that of the measures now being discussed, some have much greater potential than others for influencing the incentives for households to borrow. Here the challenge will be to find measures that are sufficiently forceful, but will not be the actual straw that breaks the camel’s back. What one wants to achieve is a controlled adjustment. Thirdly: If we are to deal with the excessively high indebtedness, it is unavoidable that this will have an effect on individual households and entail costs for the economy as a whole – although of course the benefits will ultimately weigh heavier, if we can avoid a really poor outcome. Let me be clear that I do not believe it is enough to solely implement measures that affect the supply and demand for credit through increased loan costs for households. Other measures are also needed.