, in cases such as detroit and stockton, make the public sector finances unsustainable. at a certain point, the debt service burden clashes with maintaining a sufficient ongoing provision of services to forestall people from voting with their feet. this may occur well before the point that debt service capacity appears to be fully exhausted. in other words, the prioritization of cash flows to debt service may not be sustainable beyond a certain point. while these particular bankruptcy filings have captured a considerable amount bis central bankers ’ speeches of attention, and rightly so, they may foreshadow more widespread problems than what might be implied by current bond ratings. we need to focus our attention today on addressing the underlying issues before any problems grow to the point where bankruptcy becomes the only viable option. so, i am especially pleased to see that your agenda today focuses, in part, on helping cities and states avoid such levels of fiscal stress, where the risks of going past such a tipping point become significant. in summary, state and local governments have enormous financial obligations, as well as critical service delivery responsibilities. managing their liabilities in such a way as to ensure that these vital services continue to be provided, and citizens view that they are getting appropriate value in exchange for their taxes is a daunting challenge. i am happy to see such a distinguished group assembled here at the bank to address this challenge. good luck in your work and i look forward to learning of the results of today ’ s discussions. bis central bankers ’ speeches

to ensure that it is strong enough to withstand future banking crises, without destabilising the public finances of the countries concerned. further, we must step up efforts to move forward on the third pillar of the banking union, the establishment of a common deposit guarantee scheme, based on the proposal released by the european commission last week. i would like to focus today on the single supervisory mechanism, the most developed component of the banking union. in this connection, i shall review the milestones reached and address what i consider are the main challenges ahead for us. 2. ssm milestones the first ssm milestone took place precisely before it assumed full supervisory responsibility, and it entailed successfully conducting the “ comprehensive assessment ” of all significant euro area banking groups. this review helped to enhance the information on the situation of bis central bankers ’ speeches european banks and to identify the measures that could be necessary to strengthen their solvency. in this respect, it should be recalled that spanish banks were those that evidenced fewest incidents in the asset quality review process, which entailed adjustments of little more than 0. 1 % of its risk - weighted assets. this outcome, along with the limited impact of the stress tests, highlighted the fact that the reform of the spanish banking system undertaken in previous years had met its objectives. at present, we are working on the stress test scheduled for the coming year. this test, following the methodology of the european banking authority, will be made on a sample of banks – six of which spanish – covering 70 % of euro area banking assets. the results will be published at the start of the third quarter of 2016. one of the main challenges of the ssm at the outset was to make its complex governance structure workable. this complexity derives from the institutional restrictions imposed by the treaty, from the need to ensure the separation of the monetary policy and prudential supervision functions attributed to the ecb, and from the objective of achieving a suitable incorporation of the national authorities into the new framework without impinging on the ecb ’ s leadership in supervisory decisions. as you know, the central ssm body is the supervisory board, which is responsible for the planning and implementation of oversight tasks and for submitting decision - making proposals to the governing council, which the latter may approve or object to, but not amend. the board is made up of 25 members : the chair, vice - chair, four members appointed by the ecb governing council and the representatives of the national supervisory