However, irrespective of this fact, at this point I would like to stress how important it is that we use all the resources at our disposal to try and contain the effects of systemic crises or lessen the probability that such a crisis will occur, at the very least, even if we are unable to prevent crises altogether. First, systemic crises are enormously costly. Naturally, that alone does not justify state intervention. However, the legitimation for active state intervention can be derived from the fact that systemic risk gives rise to negative externalities, i.e. market failure, if it is not taken into account in the decision-making considerations of market participants. This means that the social costs of systemic crises are higher than the private costs. In the financial sector, this issue is particularly delicate, because of specific characteristics that can give rise to negative systemic externalities of the kind I have just described. 1 I will return to this important topic later in my presentation. Second, based on historic experience, I am convinced that both the magnitude of systemic risk and the probability that systemic crises will occur can actually be reduced through intelligent regulation. Sure, they can also be sharply increased by incorrect regulation or lack of regulation. Yet, improvement can be achieved even if it is not easy to identify the accumulation of systemic risk and even if regulation will never be perfect.
It is important that the measures that are still pending also fulfil the criteria I mentioned before. In addition, there are also many proposals on the table that do not comply with the criteria of this roadmap. Thus, we need to act carefully to make sure that we introduce only effective and reasonable regulation and that we do not unnecessarily over regulate the system. It is also important to recognise that the definition of suitable measures by experts and the authorities represents no more than a first step. What ultimately makes the difference is that steps are taken to ensure they are actually implemented. The democratic legitimation, in particular, is an essential prerequisite for this. At the end of the day, it is politicians who must bear responsibility for the regulatory measures. Supervisory authorities and central banks play an advisory role but cannot make decisions on the introduction of the necessary laws and ordinances. Consequently, an important function of supervisory authorities and central banks is to provide clear justification for the considerations upon which the proposed measures and instruments are based, so that they are comprehensible for the political decision-makers. Here, too, the roadmap I have presented to you can be of assistance. BIS Review 146/2010  7