pentti hakkarainen : supervisory policies after the start of banking union – initial experiences and outlook for cesee countries speech by mr pentti hakkarainen, deputy governor of the bank of finland, at the ecb conference “ cesee – old and new policy challenges ”, frankfurt am main, 10 june 2015. * * * accompanying slides can be found on the bank of finland ’ s website : slides ( pdf ). it is a great pleasure for me to participate in this conference here at the ecb. and i ’ m particularly pleased to speak to you about the first experiences gained of the banking union, which is the most important step in the european integration since the introduction of euro. the recent crises have made it very clear that international, highly interconnected financial markets require a stronger institutional framework than what we have had in recent years. the key lesson we have learnt is that economic dislocations without proper arrangements to tackle troubled banks have devastating effects on the real economy, taxpayers and the whole society. and regaining growth proves to be painfully slow and long - lasting. in response, the eu leaders agreed in june 2012 on creating the banking union which consists of three main pillars : ( 1 ) the single supervisory mechanism and ( 2 ) the single resolution mechanism and ( 3 ) harmonized deposit protection systems. the focus of this session is on the first pillar, i. e. on the new arrangements for the conduct of supervisory policies and actions. the establishment of the ssm is not only a game - changer in the european financial market, but also very interesting and challenging from the perspective of the nordic banking sector. as a euro area country, finland automatically participates in the banking union. the finnish banking market is integrated both within the banking union and across the nordic area, with subsidiaries of large non - euro area banking groups playing an important role. our banks are strongly connected to the other nordic countries. we also have a highly concentrated banking market in european comparison. my views will be given with this background in mind, plus the fact that, some years ago, i have worked as a banker in the private sector myself. in my intervention, i would like to highlight three points particularly. first, we have gained a lot of information and valuable expertise. the comprehensive assessment, as a precursor for the start of the ssm supervision, was instrumental in many ways – not only in ensuring the health of the banks to be taken under direct ecb supervision, but also in providing

the world. 2 / 8 bis central bankers'speeches the first one is psd2, and its related concept of open banking. in the eu, the revised payment services directive ( psd2 ) is an important regulatory framework to clarify payment legislation and make it better suited to a digitalising economy. the directive aims at promoting competition, which will lead to better services and lower prices for consumers. it will open the payments market to third - party providers, and banks will be obliged to provide technical interfaces for accessing bank accounts. for some ears, this may sound daring – but the industry is currently working together with supervisors to make this as safe and secure as possible. psd2 is very much part of the broader trend of open banking. banks all around the world are partnering with start - ups, and financial services are being rebuilt using the latest technology. in practice, it means that the customer experience can be provided by some party other than the bank itself, while the bank is providing the plumbing in the background. 3 / 8 bis central bankers'speeches the second development i would like to highlight is the instant payments system tips, which will be launched by the european central bank this month. tips will enable account - to - account transfers from one bank to another, in real - time, 24 / 7, every day of the year. why do i specifically want to highlight these two developments? because when they work together, in synergy, they will have an impact which is greater than either would have on its own. whereas psd2 will help create a better payment experience for consumers, tips will make sure the money moves instantly. this will make the digital payments as close to cash as possible. 4 / 8 bis central bankers'speeches the second major force is the continuing work to make banks more resilient. this is particularly important as we are also moving towards a normal monetary policy environment, although normalisation does not mean returning to a pre - 2008 world. instead, we are moving towards a new equilibrium. since some global imbalances and vulnerabilities remain, the european economy continues to need a degree of monetary policy support. this is a balancing act, since we must ensure the sustainable convergence of inflation to our definition of price stability, while simultaneously protecting the on - going recovery of employment and the repairing of balance sheets. an important lesson from the financial crisis is that the financial industry, including banks and other financial institutions, are special and have a huge impact on