. this asymmetry might have had serious consequences in a series of recent cases, in which decisions were ultimately redirected to individual nations. financial stability is the central objective of banking union. few things can be more destructive to citizens ’ trust in the european institutions than threats to financial stability, perceived as risking 1 / 4 bis central bankers'speeches their savings. in view of the existing mismatch between european oversight and national liability, the objectives and interests of the several stakeholders involved are not aligned. so we need to ask : who is actually looking after financial stability? and which institution is capable and actually equipped to safeguard it? with the benefit of six years of hindsight, it is now clear that several links and stabilising elements are missing in the banking union. these need to be urgently tackled. at the current juncture, policymakers and co - legislators need, at least, to fine - tune the regulatory framework, and deliver on what was agreed. some concrete examples : in view of the absence of edis, if banco popular espanol had actually failed, the portuguese deposit guarantee scheme would have had to reimburse depositors in the portuguese subsidiary, even though portugal was neither supervising nor resolving popular. 3 as banks are to a large extent still “ national in death ”, this example shows us that we need to rethink the single point of entry ( spe ) / multiple point of entry ( mpe ) resolution model in tandem with the strengthening of the supervisory powers of host national competent authorities ( ncas ). additionally, a generalised entry into force of the bank recovery and resolution directive ( brrd ) and the single resolution mechanism regulation ( srmr ), irrespective of the banks ’ business models, has meant that, as of today, many institutions would only be deemed resolvable if bail - in would be extended to the level of senior debt or even deposits. this, in turn, can have destabilising effects, by amplifying the incentives for a bank run at the earliest sign of distress. it is worth recalling that, in this regard, the european banking authority ( eba ) and the european securities and markets authority ( esma ) recently published a joint statement encouraging institutions, market and resolution authorities to properly consider retail holders of debt financial instruments subject to the brrd when carrying out their respective tasks. 4 we still need to evaluate its implementation. although one may support and push for credit institutions to increase

problems. crisis management by the eu has not been particularly effective in restoring market confidence. while swift and resolute action has been taken towards strengthening the eu ’ s financial architecture, the eu has clearly been running “ behind the curve ” in dealing with the sovereign debt crisis. as a result, the ecb has been confronted with the inevitability of playing a compensating role, testing the limits of its mandate. 3. what do we need to do? as mentioned, the root causes of the current crisis, both the global financial crisis and its ramifications in the euro area, are now well understood. the issue to consider now is what to do. measures have to be taken both at the national and at the eu level. to be successful, national and eu measures need to be consistent, both as regards their design and their timing. at the national level, it is clear that utmost priority must be placed in restoring public debt sustainability, increasing domestic savings and enhancing potential growth in the crisis - hit countries. these are necessary conditions to stabilise external debt and put it on a downward path. these objectives are at the core of the recently approved financial assistance programme to portugal. at the eu level, a new economic governance model is needed to deliver fiscal discipline, prevent sustained losses in competitiveness and promote financial stability. bis central bankers ’ speeches for this purpose, in october 2010, the european council endorsed the proposals put forward by a special task - force on economic governance led by president van rompuy. the new economic governance model will comprise : a reformed stability and growth pact, aimed at enhancing the surveillance of fiscal policies and applying enforcement measures more consistently and at an earlier stage ; new provisions aimed at strengthening national fiscal frameworks ; and a new surveillance mechanism of macroeconomic imbalances. the legislative package that will establish the new economic governance model is being negotiated between the council and the european parliament, and agreement is expected before end - june. the so - called euro pact +, agreed in march by the euro area member states, and joined by 6 other eu countries, aims at strengthening policy coordination even further. the pact focuses on those areas falling under national competence which are key to increasing competitiveness and avoiding potentially disruptive imbalances. it remains to be seen whether the new surveillance framework that will soon be adopted will prove sufficient to ensure a smooth functioning of the euro area. the ecb has highlighted the importance of ensuring greater automaticity in the surveillance and