– and of compliance with rules of conduct by all financial institutions remain under the stewardship of the national authorities. these, as is moreover appropriately reflected in the report presented today, actively contribute to the supervisory and resolution functions exercised in respect of significant banking institutions at the european level, and they retain their jurisdiction over less significant institutions. accordingly, the relinquishing of sovereignty entailed by the banking union has not generally altered the organisation of financial supervision at the national level, although it has required the establishment of new european agencies that have assumed the competencies transferred from national jurisdictions. indeed, the organisation of the banking union adheres to a model involving a significantly stricter separation of functions than that prevailing in national jurisdictions. thus, two independent authorities have been created : the single supervisory mechanism, which turns on the ecb, and the single resolution mechanism, which does so on the board of the same name. moreover, although the ecb ’ s supervisory decisions are formally adopted by its governing council – which also defines monetary policy – these are prepared and pre - agreed by an independent supervisory board, meaning that the governing council acts only under the principle of non - objection. hence, when defining the institutional model of the banking union, the european legislator has set great store by preventing conflicts of interest between micro - and macroprudential supervision and monetary policy, on one hand, and between supervision and bank resolution, on the other. the aim is to mitigate the risk of monetary policy, geared to maintaining price stability, being tainted by considerations relating to financial stability, and to separate as far as possible the policies aimed at preventing solvency crises, which are pursued by the single supervisory mechanism, from those geared to managing such crises, which are the remit of the single resolution mechanism. the appropriate functioning of this model, based on the principle of separation, nevertheless requires the intense cooperation and coordination of the different authorities involved. in the case of the interaction between monetary and prudential policies, the necessary cooperation arises from the complementarity, at least in the medium term, between macroeconomic stability and financial stability and, above all, from the potential impact of the instruments available in one area on the objective pursued in the other. consider, for instance, the influence that the level of interest rates, which is decided by the central bank, has on variables so closely related to financial stability as the desire of banks and other agents to assume risk, or changes in financial asset prices. alternatively, bear in

their discussions on clarifications and guidance that the basel committee can offer to banks and supervisors regarding the treatment of the trading book. c ) home - host co - operation a third area of focus for supervisors that i would like to highlight concerns our efforts to promote a more consistent application of the new framework across jurisdictions. certainly one of the goals for any international framework is to foster a more level playing field for internationally active competitors. the basel committee wishes to ensure that competition between internationally active banks is driven by each bank ’ s individual strengths, rather than by differences in each country ’ s rules. i know that banks are deeply interested in this topic as well. representatives from many internationally active banks have impressed on me their concern that supervisors must work to avoid large differences in the adoption of basel ii and, more specifically, in the use of advanced approaches across jurisdictions. while we in the committee share this concern, we have to be pragmatic ; i believe that all of us need to stop to make a quick reality check of this matter as well. basel ii is intended to promote a more level playing field for internationally active banks. yet basel ii cannot and should not be expected to create perfect harmonisation across all jurisdictions. differences in legal systems, market practices, and business environments in each country make it an extremely difficult task - and, indeed, an impossible one - to level all distinctions across all borders. our goal for basel ii should instead be to facilitate the application of minimum standards and to work together, across borders, to promote a more consistent implementation and application of the new framework. with or without basel ii supervisors need to enhance co - operation in a world that moves towards larger scale cross - border activities and a greater presence of systemic foreign banks in domestic economies. this enhanced co - operation is a process that will promote consistency and convergence of supervisory practices. it will help to avoid performing redundant and unco - ordinated approval and validation work in order to reduce the implementation burden on the banks and conserve supervisory resources, and will therefore contribute to a more level playing field for internationally active banks. in this regard, the committee ’ s accord implementation group continues to encourage practical work among supervisors on applying basel ii effectively and efficiently to internationally active banking organisations. chaired by nick le pan, the superintendent of financial institutions in canada, the aig is currently working with supervisors in non - member countries as well to conduct a number of “ real case ” studies to gain better insight into the practicalities of co -