a residual risk can never be fully excluded. let me add that looking back the ecb has not lost a single cent. the ecb will put the necessary measures in place to avoid these conflicts and ensure separation of monetary policy and supervision. many of these measures are already codified in the ssm regulation which serves as legal basis for the set - up of the ssm. allow me to outline a few of them. most importantly, the planning and execution of supervisory tasks will be conducted by a separate body, the supervisory board. the supervisory board also prepares the draft decisions that are presented to the ecb governing council. the governing council ’ s deliberations on supervisory matters will be strictly separated, including separate agendas bis central bankers ’ speeches and meetings. a mediation panel will be set up and resolve possible differences regarding an objection of the governing council to a draft decision by the supervisory board. furthermore, the ssm will also have its own accountability procedures towards the european parliament, the council and national parliaments. accountability will be rendered by the chair of the ssm ’ s supervisory board and not by the ecb ’ s president. this is intended to avoid any confusion among the two sets of roles and to safeguard the ecb ’ s independence. in addition, the staff involved in carrying out supervisory tasks will be organised in separate directorate generals and be located in a different building once the staff responsible for monetary policy has moved to the new ecb premises. conclusions ladies and gentlemen, the euro area is early on in the climb out of the crisis. the summit is still far and covered in fog. and the euro area has to master the crux of defragmentation. evident pitfalls are between us and the rewarding view from the mountain top. these pitfalls are competitiveness, deleveraging and institutional barriers. but at the same time i believe we are on the right track. if we act prudently and put in place the necessary safeguards, this crux before us is manageable. in this regard, the establishment of banking union represents an exceptional opportunity that will support further defragmentation and ensure financial stability in europe. thank you very much. bis central bankers ’ speeches

you don ’ t teach the banking system a lesson by letting it collapse once in a while, but by ensuring proper regulation and supervision, even if some people don ’ t like it. similarly, you don ’ t make countries improve their fiscal discipline by making it possible for them to easily get away with restructuring their debts. this may actually create a disincentive, i. e. an incentive not to adopt the corrective measures which are needed to reform the economy. this is what actually happened in the case of greece last spring. as talks of restructuring spread from some euro area capitals, the greek government started thinking that this could be a nice way to go easy on the adjustment effort and it delayed some of the measures agreed in the programme. questioning the signature of the sovereign has very negative effects on the confidence of wholesale and retail investors, both at home and abroad. since public debt instruments play a key role in domestic financial markets and are an essential means of saving for the population, restructuring has very large wealth effects, with direct repercussions on the economy and also on society and on the democratic system. it is no coincidence that nearly all countries which have restructured their debt in the past were relatively poor and often undemocratic. as a result, psi, when applied to states, may end up costing taxpayers even more. in particular, additional financial assistance must be provided to a country which restructures its debt in order to avoid an abrupt interruption in the flow of credit and the collapse of the domestic financial system. such additional assistance may even be as large as the savings obtained from the restructuring of private sector credits. the 21 july agreement with greece, for instance, which aimed at saving around €50 billion of debt held by the private sector, required the disbursement of about €20 billion of extra assistance to recapitalise the greek banking system to avert its collapse and a larger amount to enhance the credit rating of greek bonds to be used as collateral for refinancing with the eurosystem. what ’ s the solution in this case? to prevent countries from getting again into the same difficulties as they experienced prior to the crisis we need tougher governance, with more stringent rules – not only on fiscal discipline but also on banking supervision – automatic sanctions and greater stringency on domestic decision - making for countries which request financial assistance. the negative experience with the stability and growth pact over the last decade should not undermine efforts to further strengthen the