luis m linde : “ the financial system ahead of the banking union ” opening speech by mr luis m linde, governor of the bank of spain, at the 5th edition of the expansion – kpmg financial forum, madrid, 23 may 2014. * * * ladies and gentlemen, it is for me a pleasure to open this fifth edition of the expansion – kpmg financial forum and to introduce ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the single supervisory mechanism. sabine lautenschlager – i hope my german pronunciation is approximately correct – is a very well known and respected european expert in banking supervision and central banking. after graduating in law at the university of bonn, she joined the german federal financial supervisory authority, bafin, in 1995, where she held relevant positions, serving as chief executive director of banking supervision. she was also a member of the basel committee of banking supervision and of the european banking authority ’ s management board. in 2011 she joined the executive board of the deutsche bundesbank as its deputy president. let me turn now very briefly to the topic of this event, namely the financial system ahead of the banking union. it is indeed a very timely issue as the ecb is currently immersed in the preparatory work to assume its new banking supervision functions, within the framework of the single supervisory mechanism ( ssm ), on 4th november. the entry into force of the ssm will really mark a major milestone on the road to the completion of the economic and monetary union and to the construction of europe. it will contribute to fostering financial integration and to breaking the loop between banking and sovereign risk : in sum, it will strengthen financial stability in europe. in the run - up to assuming supervisory functions, the ecb and the national competent authorities are conducting together a comprehensive assessment, to check the soundness of the 128 banks that will be under the direct supervision of the ecb. the ultimate aim of this exercise, which began in october 2013, is to build confidence as to the soundness of the banks under the ssm by two means : transparency and, if needed, recapitalisation. as it is well known, the assessment consists of two pillars : an asset quality review and a stress test. the first pillar, the asset quality review, began in february and will conclude in august. it examines the asset side of bank balance sheets as of 31 december 2013.

efficient manner. iv. concluding remarks over the past ten years, the euro has established itself as a stable and credible currency and the single european monetary policy has preserved price stability, and thus the purchasing power of the euro, in the euro area. in addition, the euro has played an important role in insulating euro countries from other adverse effects that the financial crisis could have had on their economies, via the foreign exchange markets and other channels, if the euro had not existed. and some member states that have not yet adopted the euro as their currency have indeed experienced such effects. therefore, the euro and the liquidity management of the ecb have also played an important role in safeguarding financial stability in the euro area. with these thoughts on some lessons that could be learnt from our experience with the euro, from the ongoing financial crisis and from the contribution of the ecb and central banks to the preservation of financial stability, i wish us all a fruitful and enriching conference. thank you for your attention.