the average total capital “ supervisory demand ” without systemic buffers ( i. e. pillar 1, pillar 2 and capital conservation buffer ). for further information, see : ecb ( 2018 ), financial stability review, may. 6 ecb ( 2017 ), financial integration in europe, may. 7 see hane, g. ( 1998 ), “ the banking crises of the 1980s and early 1990s : summary and implications ”, in fdic banking review, vol. 11, no 1. 8 retail banking integration significantly weakened the relationship between local capital and local credit supply : see krozner, r. and strahan, p. ( 2014 ), “ regulation and deregulation of the u. s. banking industry : causes, consequences, and implications for the future ", in economic regulation and its reform : what have we learned?, national bureau of economic research. 9 furceri, d. and zdzienicka, a. ( 2015 ), “ the euro area crisis : need for a supranational fiscal risk sharing mechanism? ”, open economies review, vol. 26, no 4, pp. 683 – 710 ; nikolov, p. ( 2016 ), “ cross - border risk sharing after asymmetric shocks : evidence from the euro area and the united states ”, quarterly report on the euro area, vol. 15, no 2. 10 bofondi, m., carpinelli, l., and sette, e., “ credit supply during a sovereign debt crisis ”, banca d ’ italia working papers, no 909, april 2013. 11 schmitz, m. and tirpak, m. ( 2017 ), “ cross - border banking in the euro area since the crisis : what is driving the great retrenchment? ”, financial stability review, november, pp. 145 – 157. 12 from 7. 5 % in early 2015 to 4. 8 % in early 2018 13 ecb ( 2017 ), guidance to banks on non - performing loans, march. 14 ecb ( 2017 ), addendum to the ecb guidance to banks on non - performing loans : prudential provisioning backstop for non - performing exposures, october. 15 dedicated inspections were performed with the objective of evaluating the soundness and effectiveness of the valuation framework, the controls over the pricing models used to produce fair values, and the adequacy

area now face similar capital requirements. second, european supervision adopts a system - wide perspective when monitoring and mitigating risks. supervisors can draw on a comprehensive dataset and information on banks across the euro area. on this basis, experienced staff from 28 different countries can make comparisons, spot common weaknesses and monitor potential channels of contagion. 1 / 6 bis central bankers'speeches this has two benefits. it helps address systemic risks, as better analysis of cross - border linkages and spillovers improves the coherence of macro - prudential policies set by national authorities and the ecb, which contributes to reducing excessive risks and cross - border externalities. 4 and it supports the identification of bank - specific risks. for example, supervisors have developed analytical tools to carry out detailed, comparative assessments of banks ’ business models. comparisons within peer groups have helped identify bank - specific issues early on, which are then addressed with each bank individually. the third benefit of european supervision is that it reduces fragmentation in the supervisory framework. in the past, broad discretion in applying eu rules led to significant national differences in key prudential aspects, such as the definition of funds, or capital and liquidity requirements. the resulting divergences in the capital strength of banks undermined confidence in their soundness. european supervisors identified 175 options and discretions ( o & ds ) available under eu law, 130 of which are available to national supervisors and are now applied in a uniform way across the euro area. more harmonised rules have helped re - build confidence in banks and reduce compliance costs for cross - border groups. however, the remaining o & ds exercised by national legislation still stand in the way of a level playing field for banks, and so further legislative action is still needed. similarly, the decision as to whether a bank should be resolved or liquidated is made more difficult by different insolvency rules. as a result, some harmonisation of national insolvency rules is needed to make european resolution more effective. overall, these three qualitative benefits of european supervision have been instrumental in making banks more resilient. substantial risk reduction has also taken place. the cet 1 ratio of banks supervised by the ecb increased by 300 basis points between the end of 2014 and the end of 2017 and funding and liquidity are now more stable. in the same period, banks raised their leverage ratios from 4. 9 % to 5. 8 %, catching up with their us peers.