so that countries have the right incentives to address their problems. this calls for substantial improvements in the quality of fiscal institutions and policy frameworks in europe. all in all, a lesson to take from the current sovereign debt crisis is that there is an undeniable tension between, on the one hand, the need for financial integration to ensure a smooth functioning of monetary union, and, on the other hand, micro - prudential and fiscal bis central bankers ’ speeches competencies that have remained at the local level. and this tension has the potential to exacerbate the risk of future financial crises and hinder effective crisis management. we need bold steps towards a fiscal union. we need to go beyond and create a financial union. in one word, the crisis has clearly shown us that we need “ more europe ”. the new eu supervisory framework is actually based on two pillars : first, the esrb for macro - prudential supervision and, for micro - prudential supervision, a second pillar comprising three different european supervisory authorities ( esas ) – one for banking, one for insurance and one for the securities markets. this framework provides a more consolidated and rational institutional design for linking the micro - prudential supervision of individual institutions with the supervision of linkages between institutions and within the broader system. however, as the esas were only established at the beginning of 2011, they are too young for us to judge their effectiveness. under the current framework, all supervisors in the member states continue to be responsible for assuming their individual supervisory functions, but they have to report on their practices to the relevant authority. the esas ’ regulations provide for a review of the new institutional arrangements by the european commission in early 2014. should the esas be deemed not to have adequate tools and powers, there may be a case for greater integration of the supervisory framework – including tools for crisis management and resolution. there may indeed also be some support for a single eu financial supervisor. the main argument for such an institutional consolidation is that given the growing financial “ inter - connectedness ” of europe, a centralised supervisory body would promote a more efficient level playing field in supervisory practices. moreover, it might enhance both the efficacy of supervision and the crisis management capabilities over credit institutions with a strong cross - border presence. although there are obvious benefits of such a centralised institutional structure, there are also obvious concerns about the issue of national sovereignty. let me wrap up and conclude. by providing the basis for payments and

, to better diversify and manage economic risk. the securitisation of assets made it possible for financial institutions to sell loans within complex and opaque financial products and to take them off their balance sheets. these financial techniques weakened incentives for the prudent screening and monitoring of credit risk and led to banks loosening their lending standards. eventually, when the global financial system was thrown into crisis, many policy - makers were shocked to discover that they did not have the macroprudential tools to deal with part of the financial system spiralling out of control. up until then, the common view in policy circles had been that the whole financial system would be stable as long as its single parts were sound. the financial crisis painfully demonstrated how supervisory arrangements have not been sufficiently focused on ensuring the stability of the financial system as a whole. therefore, to be able to monitor, assess and mitigate systemic risk, policy - makers have been working on creating new tools for a new policy area, namely giving a macro - prudential orientation to financial regulation and supervision. the european systemic risk board ( esrb ) was established as the main body for macroprudential oversight and surveillance of eu financial markets. bis central bankers ’ speeches as you probably know, the european central bank ( ecb ) has close links with the esrb. these include, first, a personal link : the president of the ecb also serves as the chairperson of the esrb. second, the ecb provides logistical and administrative support by hosting the esrb secretariat. and lastly, the ecb provides analytical and statistical support, collecting and processing information that feed into the esrb ’ s discussions. despite this, however, the esrb remains a body that is quite distinct and separate from the ecb. the esrb does not change in any way the functioning of the ecb ’ s statutory role and its unambiguous primary mandate for delivering price stability. the new institutional set - up, and the ecb ’ s role in it, rests on solid institutional and legal foundations. the ecb has participated closely and constructively in the legislative process leading to the establishment of the esrb. it has thus focused on establishing in europe the most effective and robust macro - prudential supervision set - up possible to prevent and mitigate systemic risk. the question remains, however, as to whether, within this new macro - prudential framework, there might not be some tension between inter - connectedness born out of