Further, while the heterogeneity of regulatory frameworks has recently been lessened following the entry into force of the Capital Requirements Directive and Regulation (CRD IV and CRR), differences persist and must be discussed. Such differences include most notably so-called national discretions and options. On one hand, the new framework provides for a gradual transition to the new capital requirements, in line with the Basel III Accord. The regulation gives countries some discretion in setting the pace of convergence towards the new requirements, which may give rise to temporary differences in the treatment of some specific aspects. For instance, a country may decide to bring forward the application of the new capital conservation buffer, initially envisaged for 2016, or the deduction of certain capital components. Moreover, the regulation provides for a series of national options that might give rise to permanent differences in the treatment of specific aspects. It is logical that the SSM should work to achieve a degree of harmonisation, seeking to restrict national options of a permanent nature. It is perhaps less logical to take steps in the case of temporary discretionary arrangements, which by their very nature must disappear within a few years. Different accounting practices, especially as regards provisioning, also significantly affect the uniformity of capital figures and should be a supervisory concern. It is thus reasonable to expect the SSM to contribute to convergence in the interpretation of international accounting standards. And it is essential that the SSM should strive equally to revise the calculation of riskweighted assets.

Apart from the reform of the Basel framework for banks (commonly known as Basel III), a basic pillar of the regulatory reform undertaken by the FSB is the new treatment of so- called “systemic institutions”. Or, in other words, the problem posed by institutions which are too big and complex to fail, meaning the authorities have to recapitalise them with public funds when they are in distress. Identifying an institution as “systemic” has consequences. They are subject to larger capital charges and to a stricter supervisory regime aimed at reducing the likelihood of them getting into difficulties. That said, if there is in fact a key differentiating factor to reduce the impact of the potential failure of a systemic institution, it is unquestionably the new resolution framework. This new framework encompasses (a) legislative reforms; (b) the requirement that institutions have resolution plans in place; (c) assessment of the effective resolution ability of the authorities of the respective Crisis Management Groups; and (d) the need for institutions to have the loss-absorbing capacity or funds to ensure that, in a situation of resolution, it can be carried out “from within”, i.e. without need for capital injections by the relevant authorities and without destabilising the financial system as a whole. Allow me to take a moment to talk about loss-absorbing capacity in resolution, or Total LossAbsorbing Capacity (TLAC). On 10 November the FSB published a proposal on the TLAC requirement to be met by systemically important banks, the final design of which is scheduled for the end of 2015.