well. so, banking supervision can be seen as an exercise in tempering this “ optimism bias ”. our most basic task is to be a tad more pessimistic than others and to challenge the banks accordingly. though it may seem counter - intuitive, in some cases supervisors are more open to change than banks. banks sometimes focus on the short term, on the here and now. their preferred postbrexit outcome would probably be to stick to business as usual, to leave things – staff, it, risk management – as they are. but this is not an option, unfortunately. so it is up to the supervisors to push banks to be agile and act before it ’ s too late. european banking supervisors have worked hard to ensure that banks are prepared for brexit. we have been clear about what we expect. we have published information on our website, we have set out our expectations in interviews and speeches, and we have spoken directly with the banks, of course. 1 / 5 bis central bankers'speeches from the start, we identified areas of concern for individual banks – particularly those that plan to relocate from the united kingdom to the eu. we made it clear that we would not accept “ empty shells ”. and we made it clear that we would not accept comprehensive back - branching practices, where banks would provide services to eu clients only from branches in the united kingdom. we outlined the main areas we would be looking at when evaluating banks ’ risk management, their staffing and their booking models. we have clearly stated that we expect all banks to have sufficient capabilities in place to manage all material risks locally, that is, here in the euro area. we have also spelled out that the outsourcing of functions or services must not compromise operational independence. regarding booking models, there are still a small number of banks that have not fully adjusted in line with our expectations. again, it looks as if some banks are not as adaptable as supervisors would like them to be. the good news is that even these banks have now started to take action. we are aware, of course, that for some banks brexit implies big organisational challenges. we will work with these banks to find acceptable solutions. but let me be blunt : many of these banks are big enough to shoulder these changes and to bring staff to the eu, even though they might not see the need. the impact of brexit will vary from bank to bank, of course. that ’ s why we

##oria or disillusion. ” he went on to draw some strategic conclusions, saying that : “ … we were given two eyes : one to watch money and credit aggregates and one to watch everything else. ultimately, these two policy perspectives are to be combined in a single strategy which subsumes them both in a unified – albeit complex – and robust framework for action. ” this was alien language in the homeland of the “ jackson hole consensus ”, which did not envisage a role for monetary analysis or financial disorder in monetary policy - making at all. it has become common parlance since, even there. at the same time, i have questions – many questions – on how best to integrate balance sheet considerations into policy - making in a way that does not undermine the best legacy of the pre - crisis era : our price stability mandate. let me elaborate. bis central bankers ’ speeches balance sheet restructuring previous crises have shown that prompt and decisive balance sheet repair after a period of excessive credit growth is the best way to restore sustainable growth. 1 post - recession growth may not even be significantly weaker than normal if the overleveraged financial sector aggressively cuts back excess credit in the recovery phase. 2 like balance sheet imbalances, structural impediments to growth and to an efficient allocation of resources are generally very relevant for the conduct of monetary policy and need to be tackled decisively. trying to stimulate growth through standard aggregate demand policies may be ineffective and, under certain circumstances, even counterproductive in balance sheet recessions, when structural breaks on potential growth predominate. 3 it is for this reason that the changes to euro area and eu governance introduced in response to the crisis are so important and need to be implemented with determination. the reforms undertaken in many stressed countries, especially those benefiting from official external assistance, should eventually lay the foundations for a robust recovery. most importantly, the steps being taken to create a banking union should help to address existing balance sheet problems. the initial focus is on banks ’ balance sheets. the comprehensive assessment of their balance sheets currently being done by the ecb is a critical element. thousands of supervisors are carefully scrutinising the books of the euro area ’ s largest banks. at the end of this process, the assets in banks ’ books should accurately reflect the economic realities. that means that the value of loans to over - indebted firms and households will be adjusted to reflect the actual debt servicing capacity of these debtors. incentives for