favourably to appropriate fiscal polices and wage settlements which allow to maintain price stability over the medium term. sustained stability - be it maintenance of price stability or stability in a wider sense - needs a sound institutional framework. as regards monetary policy the independence and clear mandate of the ecb provides the best possible arrangement. at the same time it is obvious that a monetary union which is not a mature political union also requires a framework for fiscal policy. this framework must respect the sovereignty of national governments and parliaments on the one hand and the need to ensure sound fiscal policy across the euro area on the other hand. both, sound monetary and fiscal institutional arrangements are indispensable for a consistent and sustainable stability framework. the success of emu rests not only on the ecb and its monetary policy but also on a robust framework for national fiscal policies. on 1 may 2004 ten more countries joined the eu - all of them committed to join monetary union one day. the framework for stability already plays the role of an anchor for guiding convergence as shown e. g. in the convergence reports of the ecb and the european commission. the new member states see the euro as the centre of gravity. this makes it all the more important that the basic rules of the game underpinning the existing framework for lasting stability in europe are not put at risk. no doubt the institutional framework for emu is at a critical juncture. at the same time one must not forget the fact that the first ( almost ) six years of the euro have been a resounding success. notwithstanding severe exogenous shocks the stability of the currency has been preserved, inflation expectations have remained under control and the ecb has earned a degree of credibility which is outstanding for a new institution. also the role played by the fiscal framework should not be underrated. the consolidation of public finances achieved during the latter half of the 1990s in many european countries had been unthinkable only a few years previously. these achievements must not be thrown away but need to be re - enforced to build a strong and stable future for europe.

regulators of internationally active banks. soon, the european union is likely to assume this privilege as well. we understand that any requirements we impose on foreign banks operating in the united states may well be imposed on u. s. firms operating abroad. in addition, we are operating under a veil of ignorance, as we don ’ t know whether the next firm in distress will be a u. s. firm operating globally or a foreign firm with u. s. operations. this provides us with strong incentives to view the risks from both sides. - 5as the home regulator to u. s. global systemically important banking organizations ( gsibs ), we and the federal deposit insurance corporation ( fdic ) have used the living wills process to set the expectation that a firm appropriately balance prepositioned and centrally managed resources. 2 this expectation is based on the premise that the optimal balance will depend on factors such as the firm ’ s structure and the host jurisdictions in which the firm operates. as such, the board and the fdic have asked u. s. g - sibs to analyze and anticipate capital and liquidity resources needed to ensure the continued operation of material entities in resolution. regarding capital, the positioning of a u. s. g - sib ’ s internal total loss absorbing capacity ( tlac ) should reflect a balance of certainty - - prepositioning internal tlac directly at material entities - - and flexibility - - holding recapitalization resources at the parent, known as contributable resources - - to meet unanticipated losses at material entities. 3 regarding liquidity, the board and fdic expect a u. s. g - sib to appropriately estimate and maintain sufficient liquidity for material entities, an expectation known as resolution liquidity adequacy and positioning, or rlap. 4 rlap expectations are intended to be designed so that liquidity is not “ double counted ” among home and host jurisdictions, to provide transparency into the location of liquidity across the firm ’ s material entities, and to ensure that liquidity can flow where needed with minimal potential disruption. the rlap approach is section 165 ( d ) of the dodd - frank wall street reform and consumer protection act requires a large firm to submit an annual resolution plan, or living will, that describes the company ’ s strategy for rapid and orderly resolution under bankruptcy in the event of material financial distress or failure of the company. if the federal reserve