of deferred tax assets. in a number of countries, these assets are recognised as equity when, under the crr – an eu regulation governing supervisory requirements – they generally have to be deducted from equity capital. one option allows for a longer transitional period, during which the new deduction requirements are introduced step by step. in my opinion, however, this results in disparate competitive conditions among eu banks. other options that are currently being discussed include, for instance, the treatment of intragroup loans in the light of the large exposure limit and the exemption from liquidity requirements for single entities that are part of a group. i take a positive view of the ssm ’ s current efforts to limit these national options. and today marks the beginning of a consultation on the possible harmonisation of these options. if we can bring in a reasonable limit here, this will help us harmonise supervision in the individual countries and restrict the influence of national interests. nonetheless, any effort at harmonisation needs to be accompanied by a sense of proportion ; i will return to this point later. ladies and gentlemen, like carnival today, the ssm was kicked off one year ago – and, i believe, successfully. but there is no question that such a new structure has to be further consolidated and is faced with challenges so soon after its launch. 3.... but challenges remain today i will address two current challenges facing european supervisors at the moment : first, the balance of harmonisation, subsidiarity and proportionality, and second, institutional challenges. i have already mentioned the necessity of harmonised supervisory standards. however, it must also be clear when striving to harmonise that harmonisation has its limits, because what is important is a sustainable balance between harmonisation and proportionality. it should go without saying that, for example, a smaller bank running a low - risk business model is not supervised as intensively as a larger one engaged in riskier transactions. bis central bankers ’ speeches of course, the principle of proportionality is apparent even in the structure of the ssm itself. only the 123 most significant institutions are supervised directly by the ecb ; the ongoing supervision of the approximately 3, 500 less significant banks remains the task of the national supervisors. these banks communicate directly with the ecb only in exceptional circumstances – for instance, if they require authorisations or wish to acquire qualifying holdings. the ecb is informed about each less significant institution in an annual report drawn up

european supervisory regime needs a sounds institutional framework. in this context, thought must also be given to the ssm ’ s decision - making structures and processes. now that the ecb is responsible for banking supervision, the ecb governing council is the supreme decision - making body for supervisory decisions in addition to monetary policy ones. these two decision - making powers are relevant in that banks are, on the one hand, an essential part of the monetary policy transmission mechanism but, on the other hand, are also subject to the scrutiny of the banking supervisor. it would be wrong to claim that conflicts of interest could never arise here. of course, these potential conflicts of interest were discussed back when the ssm was established, and the institutional framework that restricts the role of the ecb governing council in supervisory decisions is meant to address this. this framework has worked thus far, but i am not sure whether it will work in all circumstances. it therefore can ’ t do any harm to think of ways to improve it. bis central bankers ’ speeches alongside the institutional structures, i also see further need for improvement with regard to the decision - making structures and processes. specifically, i mean that the ssm ’ s senior management levels must – due to requirements laid down in the ecb statute – also deal with many routine tasks which, purely in terms of their content, could also be carried out at other levels of the organisation. the “ fit and proper ” assessments of future members of the supervised banks ’ management bodies with executive and supervisory functions are an apt example here. this year alone, the supervisory board, followed by the governing council, has made more than 1, 000 such fit and proper decisions. the ecb recognises these problems and is currently working on a solution that will hopefully soon be found. 4. conclusion a european supervisor for the largest banks in the euro area has now been in place for one year. from my perspective, this first year has been satisfactory and shown great promise. nevertheless, we still have some way to go before a genuine european supervisory regime is established. we will only reach this destination if, when harmonising supervisory standards and supervisory options, we strike a balance that makes sense from a supervisory and economic perspective and fits the structures and circumstances of the european banking market. this challenge can certainly be overcome, and it is with this in mind that i look forward to the ssm ’ s second year. thank you for your attention. bis central bankers ’ speeches