The third and final task should be to oversee the activities and risks of these banking groups. To set up the EOFS one would, to start with, need to second staff from national supervisors and central banks. Initially the EOFS should probably only have limited powers, namely to collect information and undertake on-sight inspections together with national supervisors. All other powers, such as licensing activities, regulations, interventions and corrective actions would still remain the responsibility of national supervisors. Consequently, the EOFS would act alongside the national authorities producing comprehensive risk analysis of the designated banking groups and based on those analysis give advice on policy actions to the national authorities. In the event of conflicting interests between authorities the EOFS could also act as neutral mediator. Further, a coordinated European supervision of banks and groups with significant crossborder activities would facilitate a more efficient management and resolution of cross-border crises. It would be easier to reach a common assessment of the systemic importance as well as the solvency of the bank or group in question. What I, in content, am proposing is that the EOFS in its embryonic stage would function more like a non-regulatory central bank than a traditional supervisor. The EOFS would conduct macro-prudential oversight and act as an enlightened speaking partner to the supervisory authorities. In my view, it is important that the EOFS is a separate agency with an independent status. The reason is that in order to be successful the EOFS would need a high level of operational independency and integrity.

In order to reap the benefits from economies of scale and scope, Nordea has chosen to concentrate its different functions, such as treasury operations, credit decision-making and risk management to specific centres of competence within the group. It is therefore questionable whether the different entities within the group really are selfcontained, even if they are legally independent subsidiaries. With this structure, it is also less likely that the group as whole can survive a failure of one of its entities. Hence, operationally and in economic terms, Nordea increasingly resembles a bank with a branch structure. A consequence is that the present regulatory structure may be less well-suited for efficient supervision and regulation of the group. A fourth challenge is that the practicalities of supervision and crisis management are greatly complicated as the number of relevant authorities increases. In normal times, this means that the regulatory burden for the financial firms increases. Also, the need for supervisory cooperation increases, which demands new supervisory procedures and the creation of common supervisory cultures. In times of financial crises, sharing information and coordinating action becomes a difficult priority, especially since time is a scarce resource in crises. A fifth challenge is that conflicting national interests emerge as banks become truly crossborder. The national authorities have a national mandate and are responsible to the national government or parliament. They are therefore unlikely to take the full external effect of their actions in other countries into account.