the rules we already have today is paramount before we engage in major new integration steps. to cut a long story short : a fiscal union, which would require member states to surrender substantial national sovereignty, hardly seems feasible at the moment. and as long as there ’ s no willingness to transfer national sovereignty to the european level, there will be no basis for mutualising sovereign risks – and that ’ s why the proposal to establish a european deposit insurance scheme ( edis ) isn ’ t the right institutional response to restore the balance between liability and control in the euro area. as long as actions taken at the national level, such as drafting insolvency law or very high stocks of government bonds on banks ’ balance sheets, can have a substantial impact on the health of financial institutions, edis would allow risks to be shifted to the european level. this would send the wrong incentives to banks and investors alike. the mutualisation of risk would not go hand in hand with the necessary mutualisation of control rights – irrespective of the single supervisory mechanism that was put in place. the second way of restoring the balance between liability and control, meanwhile, would be to strengthen the maastricht approach based on individual responsibility. this would leave economic and fiscal policy, as well as ultimate liability for public debt, in the hands of the individual member states. but how could such a decentralised approach work better in future than it has done in the past? one of the problems in the run - up to the crisis was that the fiscal rules were incapable of effectively limiting the increase in public debt. although the rules were changed after the crisis, the european commission was granted more flexibility in interpreting them. and it has used this flexibility quite a few times so far – and always to interpret the rules very loosely. as a result, the binding force of the budgetary rules is weaker than ever before, as we can see, for instance, in the budgetary developments in france, spain and portugal. one way of ensuring that the rules are binding would be to install a new and independent authority, a fiscal council. this institution would not be exposed to the same political conflicts of interest as the commission, which has to assess whether national budgets comply with the stability and growth pact and hammer out political compromises between the interests of the different member states. " debt is a two - edged sword. used wisely and in moderation, it clearly improves welfare. but, when it is used imprudently

for further cooperation. however, some cross - border matters are still unresolved and urgently need to be addressed. major differences between the us and eu regulations can be found, for instance, in the methods used to compute the initial margin coverage of ccps. and they can also be found in the scope of reporting requirements to trade repositories. let us take a brief look at these two examples. first, the rules used for calculating the minimum initial margins of ccps differ between the us and the eu. generally speaking, ccps ask for initial margins in order to hedge the market risk of a derivatives position during the liquidation period in case a clearing member defaults. under the existing eu and us regulation, risk managers at ccps have to take into account different minimum liquidation periods and confidence intervals when calculating adequate initial margins. as a result, the initial margins requested by ccps may vary considerably, depending on the location of a ccp. this might eventually drive business bis central bankers ’ speeches towards those ccps with less strict initial margin calculation requirements. to prevent such regulatory arbitrage from happening, it might make sense to agree on consistent and strict international standards in detail and thus reduce national leeway. second, the mandatory reporting rules differ significantly in terms of timing and scope. in the us, only cftc - registered “ swap dealers ” and “ major swap participants ” are required to report their transactions to trade repositories in real time. in the eu, meanwhile, transactions have to be reported by the end of the next business day by both contracting parties. furthermore, exchange traded derivatives, market prices and collateral levels have to be reported in the eu, but not in the us. it remains to be seen whether these differing reporting rules can be recognised as being equivalent. and – more importantly – it also remains to be seen how a meaningful and accurate global aggregation of trade repository data can be brought about. laying the groundwork – cooperation and harmonisation ladies and gentlemen, i have briefly discussed the too - big - to - fail problem, the shadow banking system and the market for otc derivatives. each of these issues highlights the need for international cooperation. if we do not coordinate our approaches towards regulation we will create a fragmented financial system. a financial system with vast opportunities for regulatory arbitrage and ample sources of systemic risk. against this backdrop, recent regulatory initiatives in the us worry me. they seem to contradict the need for international cooperation. a “ balkanisation