asset holdings with shorter maturity market instruments. off - balance sheet structured investment vehicles ( sivs ) became popular as a result of wholesale financing. rather than relying on deposits from private savers, as was the norm in the traditional banking model, the banking system started to borrow funds off - balance sheet in the money market by selling short - term commercial papers and engaging in repurchase agreements. this shift in funding was a by - product of securitisation as much as a source of its potentially unlimited expansion. this self - referential circuit of finance – where asset acquisition created funding needs and funding mechanisms expanded asset acquisition even further – is evident in the data. the share of total investment bank assets that were financed by overnight repurchase agreements roughly doubled from 2000 to 2007. 13 while deposits provide a rather stable and dependable source of funding for financing longer - term investments, the market for commercial papers and repurchase agreements can be prone to sudden shifts in confidence. indeed, in the summer of 2007, with investors pulling back from asset - backed securities, banks saw the value of their assets and hence their capital base declining dramatically. 4. financial excesses in the end, the social costs of negligence and abuse were devastating. even more so, because finance had expanded at an unsustainable pace in the years leading up to the 2007 / 2008 crisis. a number of economies had come to pin their national fortunes on a sector that is potentially very profitable, but also ruinously risky. the financial industry has grown substantially during the past three decades. in 1977 the share of financial intermediation in total us gross value added was around 5 %. in 2007 this share was over 8 %. it was also a highly profitable business for years. financial sector compensation as a share of total us compensation doubled during the last thirty years. in the euro area this share rose by roughly 25 %. high earnings attracted many bright young people into the industry. although the total number of employees in the financial sector remained relatively stable, higher than average wages in the finance industry led to a diversion of highly - skilled individuals from the real economy to the financial sector. 14 for instance, in 2006 a financial industry employee earned 35 % more than an engineer with a similar level of education. these numbers speak a clear language. financial creativity had its price. banks increased their demand for highly - skilled talents, bidding up the market clearing wage in this industry. whether or not financial employees have been overcompensated

. this time also included the establishment of ese, the european supervisor education initiative in 2009 – a project involving supervisors and central bankers as wells as academics. ese is a joint venture which has set itself the task of ensuring uniform training of supervisors at a high level in europe and promoting the sharing of knowledge between researchers and practitioners. after all : a stable financial system requires not just good rules but also highly qualified supervisors in order to enforce these standards. 3. the present let us now take a step forward – to the present. where do we stand now, five years since the outset of the crisis? despite all the criticism about the seemingly sluggish pace of reforms : i believe it is quite fair to say that we have made very tangible progress. the implementation of the revised basel standards will make banks more resilient. we have tightened the requirements for risk management and expanded our horizon by integrating bis central bankers ’ speeches macroprudential knowledge. and these are just a very few items from among the many reform projects currently ongoing ; i ’ ll spare you the full list. however, a decision on what is probably the most important innovation was taken just recently. i am referring, of course, to the single supervisory mechanism, or ssm, here in europe. i have high expectations of the ssm and think it will help us to detect risks in the european banking sector at an earlier stage in future and to tackle them more rigorously. although i am in favour of a different legal basis, one that could simplify matters a lot given the now very complex ssm governance structure, i am nevertheless convinced of the advantages of the ssm. one factor will be decisive for the success of the ssm : close and constructive cooperation between all parties involved. the ssm is designed as a system composed of the ecb at the centre and the national competent authorities carrying out decentralised processes and procedures. as members of the supervisory teams and the decision - making bodies, the only way we can meet the high expectations of the ssm is if we all pull together. i am especially looking forward to even closer cooperation in the future with our colleagues from the ecb and the other national supervisory authorities. cooperation is also the guiding star of ese. the initiative has already shown us how cooperation between supervisors can be made to work. as my fellow board member rudolf bohmler illustrated this morning, ese seminars are attended by participants from a multitude of institutions and countries. this spirit of