In our day-to-day work, be it the preparation and implementation of European regulations or the actual performance of supervision, we run into the problem of overcomplicated and unclear regulations. The modern theory of law accepts that laws conflict. I believe we reached this point in regulation long before the Great Depression. We have made no secret of the fact that we believe the weaknesses in the European banking sector laid bare by the financial crisis should be dealt with by enhancing supervision, i.e. its processes, institutions and culture, rather than by adding more regulations or hastily changing the existing ones. Yet the regulatory whirlwind we are currently experiencing is far from over. This naturally gives rise to a number of questions. Can we be sure that such regulations will not generate even more problems? How will institutions cover all the costs of implementing the changes to all the regulatory requirements, costs which, even worse, are often hard to predict? Might a situation arise where all financial institutions have implemented CRD, CRR, BRRD, MREL, LCR, NSFR, leverage and so on, but still have little prospect of making the profits demanded by investors? Might the incentive to do business in the banking sector be weakened? Are we contributing to a shift of business not only outside our countries, but, more dangerously, outside the regulated market? These fundamental questions are not prompted solely by the recently adopted or planned regulatory changes.
We also have doubts about the existing deposit insurance system of full cover up to EUR 100,000 adopted at the start of the financial crisis. At the time, this measure certainly helped calm the public and prevent runs on banks. However, we feel that the time has come to consider a return to normal, to reintroduce the system where depositors are not fully covered, at least with respect to non-SIFI banks. I think the question that forms the title of this conference is very topical and relevant. We believe that the time has come to pause and try to discuss these issues seriously. BIS central bankers’ speeches  1  As to costs, supervisory authorities are also incurring high costs. On the European scale, we are recruiting hundreds of new employees to be able to meet the challenges of applying the new regulations. Mandatory impact assessments have been introduced, but these often sound like unconvincing or formal justifications for a result known in advance: “There will be costs, but the benefits will outweigh them in the long run”. As to complexity, we have plenty of evidence that the current sectoral approach to regulation does not make our life as supervisory authorities any easier. We are often creating three parallel but materially identical sets of basic requirements for banks, insurers and investment firms.