must be careful not to disturb this balance. and here is where i see some cause for concern. regulators might be tempted to lay down rules to cover every eventuality – think of the example i just gave you. and their motivation would certainly be laudable. but their goal would be unattainable. it is just not possible to cater for every potential situation. there are too many possibilities, most of which we cannot anticipate. no one knows what financial innovations might emerge ; no one knows where technological change will lead us ; and no one knows how the economy will evolve over the coming decades. if we try to cover everything, the rulebook will, at some point, become too detailed, too big and too complex. from that point onwards it will stop making the banking sector a safer place and instead create new problems. first, overly complex rules facilitate regulatory arbitrage. yes, we could add page after page to the rulebook, setting out detailed rules, definitions and thresholds governing how banks should deal with risks and specifying, for instance, which tools supervisors should use in certain situations, and when. but with each new page, more loopholes open up. it becomes easier for 2 / 4 bis central bankers'speeches banks to game the system. this defeats the purpose of a rulebook and poses a threat to stability. second, there is the problem of interaction. the more rules there are, the more they can interact and interfere with each other. if there are two rules, there is just one way in which they can interact. if there are 1, 000 rules, they can, in theory, interact in at least 500, 000 ways. it becomes ever more difficult to foresee the overall effect of the rules, and the danger of unintended sideeffects increases. and third, there is the issue of costs. the thicker the rulebook, the more expensive it becomes for banks to comply with it and for supervisors to do their jobs. these costs are justifiable if each additional rule reduces the risk of another crisis. however, at a certain point the costs of the rules begin to outweigh the benefits. so, instead of having overly detailed rules, we should have a strong basic set of rules that allows supervisors some discretion.. supervisors have the relevant skills and experience, and in - depth knowledge of the banks they supervise. we should ensure that supervisors can continue to apply their judgement. they should be empowered to assess the

does not differ across countries. this would promote the integration of banking markets and prevent the reemergence of the sovereign - bank nexus. in contrast to national schemes, which might ultimately have to rely on taxpayers'money in the event of large shocks, a european deposit insurance scheme would benefit from diversification and the pooling of resources. with common supervision and a significant reduction in legacy assets, two key preconditions for edis have been met. we welcome the recent progress made by the european parliament on this matter. in addition, further progress on the capital markets union would complement the important role that european banks play in funding the real economy. the capital markets union would provide better access to equity capital to finance long - term, risky investment projects and improve private sector risk sharing. it can support the integration of banking markets by removing national rules that currently limit banks'cross - border activities. we hope that the european parliament will continue legislative work to sustain the european banking sector's resilience and foster its integration. we stand ready to engage further with you and contribute our expertise where needed. 1 see " the euro area bank lending survey - third quarter of 2024 ", ecb website, 15 october 2024. 3 / 4 bis - central bankers'speeches 2 for more information, see elderson, f, " preparing for the next decade of european banking supervision : risk - focused, impactful and legally sound ", speech at the " 10 years ssm and beyond " event organised by allen & overy, 27 june. 3 see guide on effective risk data aggregation and risk reporting, ecb, may 2024, and the public consultation on the guide on governance and risk culture which was closed on 16 october 2024. the final guide on governance and risk culture will be published in 2025. it covers management bodies and committees, internal control functions, risk culture and risk appetite frameworks of banks. 4 the integrated reporting framework will integrate, standardise and minimise the burden and costs of the eurosystem's statistical requirements for banks. for other examples of efforts that the ecb is contributing to with a view to enhancing supervisory data sharing and reducing reporting requirements, see the opinion of the european central bank of 21 june 2024 on " the proposal for a regulation of the european parliament and of the council as regards certain reporting requirements in the fields of financial services and investment support ", ( con / 2024 / 21 ). 5 see letter from claudia bu