2  BIS central bankers’ speeches  In addition, none of these sectors is unregulated today in Europe (AIFM directive for alternative funds, UCITS directives for funds, Solvency 2 for insurance, EMIR for CCPs) and replicating some rules stemming from banking supervision to these entities would simply be irrelevant. More generally, it is up to the policy makers to act consistently and try to anticipate and mitigate any possible unintended effects of their policy decisions. For instance it might seem contradictory to encourage central clearing of derivatives or trading on organized trading platform as a means to reduce systemic risks on the one hand, while on the other hand levying a Financial Transaction Tax on these operations if they are deemed safer. Policy makers should make sure their actions will not be a factor of market instability which could spread to the market and create another crisis. Conclusion As we can see, policy makers have still a lot of work on their plate as regards the design of an adequate regulatory framework for the “shadow banking sector” and for it to be sufficiently sound to be providing a sustainable “market based financing”. The Capital Market Union’s project launched by the European Commission is aiming at achieving to achieve a sound regulatory framework. To this end, for instance, the European Commission with the help of the European Banking Association (EBA) has recently defined criteria for Simple, Transparent and Standardized (STS) securitization.
The idea is both to regain investors’ confidence in securitization assets, which we must admit still suffers from the US subprime crisis, and to encourage banks to deleverage loans portfolio from their balance sheet to refinance the real economy. By encouraging this new type of securitization, the European Commission is mindful to avoid another subprime crisis. Indeed, rebalancing the financing mix of the EU economy as promoted in the CMU initiative is a valuable objective provided a rightly calibrated regulatory and risk framework is in place. These are some of the challenges to tackle in the years to come. And let me wish you a fruitful conference. I now leave the floor to Jean Tirole. BIS central bankers’ speeches  3