I hope that the Financial Stability Board Working Group on the Crisis Management Principles will not hesitate to report back to the FSB, and through it to alert G20 Ministers, if implementation is or looks to be stalling – whether because it is meeting with resistance from the authorities or the industry, or blockages in national laws and practices. 8  BIS Review 83/2009  Concluding comment This crisis has reminded a generation of some old truths. Banks can fail. But they matter enormously to our economies, and so the authorities cannot afford to stand back and allow disorderly systemic failure. Going forward, we cannot have a regime where the upside for risk-taking goes to shareholders and management, but the downside falls to the general taxpayer. All three elements of the Social Contract for banking need to be reformed. Better regulation and supervision, including a macroprudential element. Better arrangements for liquidity insurance, which the Bank has tried to introduce alongside our international peers. And, my main topic today, a new regime for resolving bank distress. In particular, banks must structure and run themselves to permit orderly wind down. And they must invest to provide the authorities with the information they need to do so. This will not be easy. And it will not be cheap. Together with higher capital and liquidity requirements – lower leverage and reduced maturity transformations – over time it may well mean a lower headline return on equity for some banks.
The letter says: “The rise in the cost of living in the past three years has been larger than has been seen in many other countries that compete with us in foreign markets. When the cost of living rises, so wages should also rise and consequently so too production costs, with the result that our competitiveness declines. Do we not have to fear this?” Unfortunately we do not know what advice Nurkse gave to Jaakson, and within only a couple of years the question was no longer of any great relevance for Eesti Pank. During the second world war, Ragnar Nurkse focused in his work on inflation and exchange rates. The research that he published on these topics has led many writers to call Nurkse one of the main architects of the Bretton Woods system. After the war Nurkse taught for thirteen years in the prestigious Columbia University in New York. There he mainly focused on development economics, earning a great reputation as an international advisor on the subject. He died unexpectedly and still relatively young at only 51. The view of Ragnar Nurkse of the time notes his thorough knowledge of economic theory and practice, his original ideas, and his clear vision. He was the sort of man who is clearly needed in the world today. When Estonia regained its independence it chose the path of reform, with a unique combination of conservatism, innovation and a recognition of its own limitations. Estonia chose once again the road to Europe.