. a lot of “ healing ” has already taken place. since the start of the financial crisis, half a trillion euro of additional capital has already been pumped into the banks ( totalling to over 5 % of area - wide gdp ). results for the second quarter for euro area banks also show an improvement in return on equity. however, both the geographic location and the size of banks remains a crucial determinant of financial performance. the funding situation has also normalised somewhat ; still, it remains challenging given persistent fragmentation in funding markets. our comprehensive assessment is aimed at completing this ongoing “ healing process ”, by identifying remaining pockets of weaknesses and prescribing and fostering the necessary corrective actions to overcome them. how those corrective actions should be financed is clear. private - sector money should be first in line to reinforce the banking sector. banks could increase their capital by various means, they could retain earnings, raise equity in the market, or sell some of their assets. public money should only be used when private solutions are not available or have been exhausted. whilst it is not yet clear whether these public backstops will need to be tapped, it is essential to have them in place. if not, the credibility of the whole exercise is put at risk, as the outcome will then almost certainly be negatively perceived by market participants. doing this balance sheet assessment without a backstop in place would be a bit like getting on a boat in rough weather conditions, and not taking a life jacket on board. discussions are progressing in the european fora on putting in place these backstops. the single resolution mechanism whilst the progress on the ssm is a step in the right direction, it is not enough. we at the ecb consider the srm to be an indispensable second pillar of the banking union. in economist jargon : the current state is not a stable equilibrium. indeed, a ssm without an srm will not set the right incentives for national authorities. if they have to pick up the tab when the banks need to be resolved, we cannot expect them to fully cooperate within the ssm. so, we need to put in place a strong srm. we support the main tenets of the commission ’ s proposal on the srm. in particular, having a single system with a single fund is of the essence. bis central bankers ’ speeches experience in recent years has in fact shown that any form of coordination of national resolution authorities and national funds was beyond

reach. on the basis of this experience we do not believe that a network of resolution authorities and funds can cater for swift, effective, and impartial decision - making, which is so much needed in case of resolution. in the recent discussions surrounding bank resolution, a lot has been said on bail - in versus bail - out. allow me to take the opportunity of being here in stockholm, at an event organised by a danish bank, to make a few points on the danish and swedish experience with banking crises, and draw lessons for the future. the danish case the danish government ’ s first reaction to the financial sector woes in 2008 was in many ways similar to those of other european states : ample recourse was made to bailouts, loans, guarantees etc. however, at the peak of the banking crisis in 2010, denmark chose to take a tougher stance than its european counterparts. with its third bank package, it was the first european state to force senior creditors to take a hit when banks failed. haircuts of 16 % and 14 % were imposed on senior creditors of amagerbanken and fjordbank mors respectively. as danish banks were deemed to be benefiting less from an implicit government guarantee than their competitors, they were penalised by rating downgrades and a hike in funding costs. the danish experience illustrates the need for a harmonised approach across the eu to ensure a level - playing - field. whereas the rationale may have been sound, market effects can be negative and even volatile when member states implement such policies alone and unexpectedly, particularly in times of market stress. it is important to allow banks as well as investors adequate lead - time to anticipate for such regime shifts. with this in mind, the ecb is of the view that the envisaged bail - in rules should be introduced at the same time across the eu and that this should be done by 2015, thereby providing the required certainty for market actors and ensuring a level playing field. the danish example also teaches us another lesson : the debate on resolution should not be reduced to a mere question of bail - in versus bail - out. there are other tools in the resolution toolkit – apart from bail - in – that can be used to deal with troubled banks and be equally effective in shielding taxpayers. while reviewing their response to the crisis, the danish authorities decided that facilitating bank consolidation was the primary path towards a healthier sector. they decided to push for private sector buy - outs of