, and a unified application for the euro area. more specifically, the legislation of the european union has activated the european bank recovery and resolution directive ( brrd ) for all member countries and has established the single resolution mechanism ( srm ) in the euro area, as well. the brrd creates such instruments for a preventive recovery and early intervention in a bank, designed to avoid the failure of a bank, as well as facilitate an orderly resolution when banks are failing, to protect the public interest. the new law replaces the standard insolvency proceedings of a bank with the resolution undertaken by the relevant authority. banks ’ failures and financial crises may be common events. they are very costly, as well, which, in some cases, can be as high as 40 – 60 % of the gross domestic product. this includes losses in deposits, weakening of access to finance and loss of public confidence in the financial system, which, in turn, reduces its capacity to support economic growth and decrease poverty. also, standard insolvency 1 / 5 bis central bankers'speeches proceedings for failing banks proved inadequate in times of crisis because they did not address systemic risk nor ensured the continuity of critical functions ; moreover, they did not protect depositors. these procedures require time, long negotiations as well as complex arrangements with creditors, which may damage and further diminish the asset value of the distressed bank, hence causing severe consequences for the real economy. for this purpose, the new recovery and resolution law provides the supervisory and resolution authorities with the legal capacity and the necessary instruments for restructuring bank operations, in the event its possible failure jeopardizes financial stability or undermines other objectives of the regulator. the aim is clear : on the one hand, we have the public interest on financial stability, while, on the other hand, remain the shareholders of the bank, who have voluntarily undertaken the risk by investing in the bank. if the shareholders rely on the possibility of an implied state guarantee for banks, this constitutes a moral hazard on their part, therefore increasing their risk appetite. the implementation of the resolution law formally eliminates the basis for the expectation for any such guarantee. among the costs caused by the failure of a bank, contagion is probably the highest, since it turns the problem of a single bank into a problem for the entire banking sector. it may happen for two reasons : due to the spillover effect of a bank ’ s exposure towards another, as well as due to public panic,

costs beyond their individual dimension. through this new capital composition, the macro - prudential instruments manage the systemic risk before it materializes, decreasing the probability of occurrence and, after its materialization, minimizing losses that are absorbed by the higher level 2 / 5 bis central bankers'speeches of capital. but still a lot of work remains to be done. it has long been recognized that a deeper financial integration also brings a better functioning of the european union. yet, financial integration showed to be shallow and reversible and, after the financial crisis, fragmentation increased against centralization and integration. the measures undertaken to reduce liquidity within each country improved the national financial stability, but neglected the effect on other countries. the banking union addressed these inadequacies by concentrating the national financial policies at the central level and aiming to fulfil two objectives : to ensure banks ’ soundness and promote a deeper integration of the banking sector. the single supervisory mechanism plays an important role in these objectives. a stronger and more uniform supervision enhances banks ’ stability and provides them with a more coherent framework of policies on cross - border banking, producing benefits compared with the fragmented system of national supervision. as mario draghi says : “ let ’ s keep in mind that fragmentation starts with the decision by banks not to operate in regions where the risk - return of lending is judged to be insufficient to remunerate their invested capital ”. supervisors ’ advice for banks in the post - crisis period remain the same : banks should adapt the business model to be more effective and profitable, improve risk management and manage the cleaning of the balance sheet from legacy assets. despite the progress made, these tasks are yet to be completed and now is the most appropriate time to finalize them. the regulatory framework is clearer and more complete ( the implementation of basel iii is starting ), supervision is clearer in terms of methodologies and policies, and the application of fintech allows banks for new ways to do business efficiently. lastly, and more importantly, the overall macroeconomic framework is stabilised and the positive economic growth is stable. the framework presented above is a good guideline to address the remaining post - crisis challenges. is the adoption of international standards on financial stability safeguarding necessary? the answer is yes, because the globalization and interconnection of the banking sector needs the standardization of prudential regulation. however, while adopting international standards, it is important to keep in mind two issues : first, these standards have to adapt