Until now, we have mainly been concerned with “quantities", and I would just like to say a word in this respect on the Stability and Growth Pact: in my mind, it would be both dangerous and illusory to want to change the rules – rather, let’s respect them. But at the same time, we should consider the quality of public spending: in order to boost potential growth, in the long term, expenditure on investment and on our future are vital, including on education and training and, of course, new technologies. This is true of national budgets, but we could amplify the effect through a euro area investment budget. This budget could be used to finance, for the benefit of all countries, certain “common goods” such as digital technology, energy transition, security, and external border protection. Finally, my third idea begins with a question: how to deal with stabilisation? In other words, how to deal with the shocks that can have a brutal effect on certain national economies? Private risk 2/3  BIS central bankers' speeches  sharing through the Capital Markets Union and the Financing Union that I mentioned earlier, is part of the answer. In the United States for example, the stock market is capable of absorbing around 40% of a State-specific shock. But that is not enough and it is absolutely vital that we go further still.
To a significant degree, the crisis was about regulatory gaps – be it gaps in terms of loosely regulated mortgage underwriting practices in the United States, the activities of bank-sponsored structured investment vehicles (SIVs) and conduits, the providers of insurance guarantees against structured finance products such as AIG Financial Products Group, or the structured  1  In this regard, I am considerably more worried about countries that implement standards that are more lax than the norm, rather than more tough than the norm. However, if many countries individually were to opt for tougher standards, this could raise questions about whether the international norm is too lax. 2  Work underway by the Basel Committee on Banking Supervision and others all are designed to make the traditional banking sector more robust. This includes requiring more and higher quality capital, better capturing of risk in the application of capital standards, imposing a capital leverage limit on banks, raising liquidity buffer requirements, and requiring compensation regimes to be consistent with financial stability. 2  BIS Review 28/2010  finance models of the rating agencies and others that turned out to be defective. Thus, the experience of the recent crisis strongly suggests that confining regulatory reform to strengthening the banking sector would be insufficient to make the financial system as a whole resilient and robust. A crucial case in point is the too-big-to-fail problem. Having some firms that are too big to fail creates moral hazard, which distorts incentives.