In Italy, the recent pension reform which approves the full transition to a contribution system completes the necessary correction of the pension spending dynamics which was started years ago. As Germany shows very well, large and effective welfare systems can be made more efficient without compromising social goals. We are living at a critical juncture in the history of the Union. The sovereign debt crisis has exposed serious weaknesses in the institutional framework; in this context, the difficulties in finding common solutions are having a negative impact on market valuations. The extraordinary measures taken by the ECB have gained us time; they have preserved the functioning of monetary policy. 2  BIS central bankers’ speeches  But we have now reached a point where European integration, in order to survive, needs a bold leap of political imagination. It is in this sense that I have referred to the need for a “growth compact” alongside the well-known “fiscal compact”. A growth compact rests on three pillars and the most important one, from a structural viewpoint, is political: the economic and financial crisis has challenged the myopic belief that monetary union could remain just that, and not evolve into something closer, more binding, into an arrangement whereby national sovereignty on economic policy is replaced by the Community ruling.

We have made good progress in regulating these various FSB standards in the UK, either through Bank of England Policy statements or Prudential Regulation Authority (PRA) rules. UK banks have been given indicative MREL requirement to meet by 2020; they will have operational continuity arrangements in place in 2019 (alongside the implementation of ring-fencing); and they are already trading on protocol terms with 4  See FSB ‘Principles on Loss-Absorbing and Recapitalisation Capacity of G-SIBs in Resolution’ (2015) http://www.fsb.org/wpcontent/uploads/TLAC-Principles-and-Term-Sheet-for-publication-final.pdf. 5 See FSB ‘Guidance on Arrangements to Support Operational Continuity in Resolution’ (2015) http://www.fsb.org/wpcontent/uploads/Guidance-on-Arrangements-to-Support-Operational-Continuity-in-Resolution.pdf and FSB ‘Guidance on Continuity of Access to Financial Market Infrastructures (FMIs) for a Firm in Resolution’ (2016) http://www.fsb.org/wp-content/uploads/Continuity-ofAccess-to-FMIs-Consultation-Document-FINAL.pdf. 6 See FSB ‘Cross-Border Recognition of Resolution Action’ (2014) http://www.fsb.org/wp-content/uploads/c_140929.pdf. 7 See ISDA ‘2014 Resolution Stay Protocol’ (2014) http://assets.isda.org/media/f253b540-25/958e4aed-pdf/, ISDA ‘ 2015 Universal Resolution Stay Protocol’ (2015) http://assets.isda.org/media/ac6b533f-3/5a7c32f8-pdf/ and ISDA ‘ Resolution Stay Jurisdictional Modular Protocol UK (PRA RULE) Jurisdictional Module’ (2016) http://assets.isda.org/media/f253b540-94/cd991d70-pdf/. 8 See FSB ‘Guiding Principles on the Temporary Funding Needed to Support the Orderly Resolution of a Global Systemically Important Bank (“G-SIB”)’ (2016) http://www.fsb.org/wp-content/uploads/Guiding-principles-on-the-temporary-funding-needed-to-support-theorderly-resolution-of-a-global-systemically-important-bank-“G-SIB”.pdf and FSB ‘ Funding Strategy Elements of an Implementable Resolution Plan’ (2017) http://www.fsb.org/wp-content/uploads/301117-2.pdf. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4  buy-side firms as well as other G-SIBs. To the point that resolvability is progressive, the major UK banks on average now have total loss absorbency of 23% measured against risk-weighted assets (RWAs) compared to an average end-state requirement of 28% (including buffers).