identify and prevent the persistent accumulation of financial imbalances at an early stage. this will help ensure a more resilient and viable financial sector. a financial sector that is capable of contributing to sustainable growth. second, it has demonstrated that we urgently need a european framework for the resolution of financial institutions. this should include a clear set of commonly known ex ante rules for bail - in, buffers of ‘ bail - inable ’ assets and depositor preference. regarding the latter, the new framework should place depositors at the top of the creditor hierarchy and ensure that the role of dgs in resolution is limited to insuring eligible depositors. this will contribute to reducing the risks to financial stability by providing legal certainty and predictability to resolution. third, it has revealed the pressing need to establish a single resolution mechanism ( srm ). the srm is a fundamental pillar of the banking union and is a necessary complement to the ssm. this requires a strong authority at its centre which should provide timely and impartial decision - making which minimises the costs of resolution. the srm should have a european resolution fund at its disposal which should have access to a temporary and fiscally neutral public backstop. i thank you for your attention and stand at your disposal for questions. bis central bankers ’ speeches

be continued if and only if a programme was in place that would ensure the solvency of the banks concerned. after the eurogroup agreement on 25 march, the ecb did not object to the request for the provision of ela by the central bank of cyprus. on both occasions, the ecb acted strictly in line with its statute. it implemented the existing rules. nothing more, nothing less. the finally agreed eu / imf programme reflects the three objectives i mentioned earlier. in particular, it was decided to cover the capital needs of the two largest banks exclusively through the own contributions of uninsured depositors and senior and junior debt holders. the creditors of the two banks would not be made worse - off than they would have been in the case of liquidation, which would have been the alternative to the programme. this is necessary to guarantee the sustainability of public debt. it will also contribute to restoring the conditions for sustainable and balanced growth. in addition, the eu / imf programme foresees a rapid and substantial downsizing of the domestic banking sector, from about 550 % to about 350 % of gdp at the beginning of the programme. this is indispensable to reduce future contingent liabilities from the banks to the sovereign. the eu / imf programme also foresees the full protection of deposits below 100, 000 euros which will not suffer any loss from the resolution strategy. despite the unprecedented steps taken so far, the banking sector has not yet been stabilised. the burden sharing arrangement negatively affected depositor confidence and required the introduction of temporary and proportionate capital controls and restrictions on deposit withdrawals. short term risks are high, as the deep recession is expected to take a toll on banks ’ balance sheets. the reliance of the largest bank on ela continues to be exceptionally high. hence, firm steps are needed to complete the financial sector reform so as to rebuild confidence in the viability of the banking system. bis central bankers ’ speeches let me now turn to the lessons which we can draw from the experience in cyprus. lessons from the cypriot experience the cypriot case has been a salutary reminder of the importance of establishing banking union as swiftly as possible. only then we will be able to break the negative interaction between sovereigns and their banking systems. first, it has shown that the speedy entry into force and implementation of the single supervisory mechanism ( ssm ) is essential. the centralisation of supervision as well as the effective use of macroprudential tools should help