any undue advantages or disadvantages. moreover, the ssm places a strong emphasis on transparency and accountability. it is essential that both the market and the entities under supervision have a clear view of 1 / 4 bis - central bankers'speeches our policy stances and of our supervisory process and its results. this is not only a good practice for financial authorities, it is the backbone of mutual trust and confidence. the ssm has integrated our voices and efforts, in the pursuit of the'one team spirit ', enabling us to leverage different supervisory cultures and diverse operational experiences under a unified ssm methodology. thus, the ssm has capitalized on the histories of the national supervisory authorities, guided by a shared european vision. however, as we reflect on our accomplishments, we must not rest on our laurels. the global financial landscape is continually evolving, and our european framework must evolve with it. as we chart our path forward, there are specific aspects that warrant our continuous attention and effort. first, there are the differences in national regulatory regimes : while the ssm has made significant strides in harmonizing supervisory practices across europe, we must remain committed to working on the progressive reduction of disparities between national regulatory regimes in several areas. by the same token, we are still awaiting the completion of the third pillar, the european deposit insurance scheme ( edis ). the puzzle is not yet complete, but we remain confident that we will ultimately get there. second, the sense of belonging to a single system for our resources : this is an issue that has been at the forefront of discussions, particularly with the initiation of the ssm integration project.... and challenges ahead while we take pride in our achievements, it is equally important that we address the challenges and potential vulnerabilities affecting the financial industry, calling for changes in our supervisory approach. one of the critical areas of concern pertains to the ssm's primary focus on supervising banking groups, which constitute just one facet of the broader financial landscape. however, non - bank financial intermediation, encompassing entities such as financial intermediaries, asset management firms, investment funds and payment service providers, has seen significant growth over the past decade and is strongly interconnected with the banking system. while this evolution is a positive development in terms of fostering financial integration and bolstering economic growth, it also introduces heightened risks to the financial system. increasing competition and potential spill - over effects cannot be disregarded from a

international banks in the latest financial crisis illustrates how real this problem can be. 5 this is also an example of how risks that may not appear significant from a microprudential perspective may actually become much more worrisome if assessed through a macroprudential approach – a viewpoint whose importance andy was among the first to stress. another channel through which tbtf status can endanger financial stability relates to the balance between idiosyncratic and aggregate risk. regardless of their portfolios, large banks are particularly exposed to sovereign risk and policy uncertainty, two sources of aggregate risk. at the same time, the spread - risk relationship, i. e. the sensitivity of banks ’ funding costs to bank risk, weakens when a bank is thought to have tbtf status. put differently, in relative terms large banks take less idiosyncratic risk, but more aggregate risk. this can make the system inherently riskier, and it is one of the reasons why many regulatory initiatives have tried to tackle the tbtf problem and reduce its externalities. 6 the related issue of the bank - sovereign loop is also dear to andy. 7 andy has been an advocate of the idea that economists should communicate more with, and ideally learn more from, ‘ proper ’ scientists, and that some of the tools employed by biologists and engineers could be deployed in the financial sphere, too. his work on financial networks is motivated by the intuition that financial crises spread pretty much like diseases, through contagion mechanisms that depend on the nature and structure of the linkages between banks. 8, 9 a key message from andy ’ s work is that network complexity can be good or bad for financial stability. the reason for this is that highly interconnected interbank networks exhibit a knife - edge property. in the case of small shocks, the connections across banks ( such as loans and repos ) typically serve as risk sharing and mutual insurance devices, making the system more resilient. beyond a certain threshold, however, they act as amplifiers, generating broad and unpredictable default cascades – an extreme form of systemic risk. once again, the appeal of this story is immediate when thinking about our recent history : increasingly complex financial networks seemed to deliver greater stability for a long while, until lehman – a large shock – came along. the most vivid example of this principle that comes to my mind, however, has nothing to do with finance. on the 28th of september 2003, italy was hit by a massive electricity black - out when