can keep the gains but pass potential losses on to someone else, you might be tempted to take on too much risk. so, in practice, the market has its shortcomings. but is that a reason to do away with it? no, not at all. we should try to make it work. for the banking sector, this means aligning incentives. and as i just mentioned, the best incentive to keep risks in check is potential failure and financial loss. as the economist allan meltzer noted : “ capitalism without failure is like religion without sin. it doesn ’ t work. ” but in banking, there was a lack of failure. during the crisis, many banks that should have failed did not fail. instead, governments propped them up with public funds – at huge cost to taxpayers. they did so out of fear of a systemic crisis. they were worried that when a large bank fails, it would drag others down and destroy the entire system. so there was a situation where banks could pass on any losses to someone else while keeping any profits. they had an incentive to gamble with other people ’ s money. so, we need to make it possible for banks to fail without causing the whole system to collapse. and we need to make sure that profit - makers are also loss - takers. that would align incentives, strengthen market discipline and keep risk - taking in check. in europe, we now have a new system for exactly that purpose : the single resolution mechanism, srm for short. the srm provides the tools to resolve banks in an orderly manner. earlier this year, it passed its first test when a couple of banks failed. this was a huge step towards imposing market discipline on banks and making them safer and sounder. and i can confirm that dealing with a failed bank is among the most complex things you can do as a supervisor. the first step is that the ecb declares the bank failing or likely to fail. and that, in itself, is a delicate matter. a bank can fail for a million reasons. sometimes it is a slow death that drags on over weeks and weeks. sometimes it all happens within a couple of days. in the end, it is up to the ecb to decide whether the moment has come, and that is a decision which cannot be taken lightly. taking it too early might infringe the rights of investors and creditors. taking it too late might lead to a systemic crisis ; it might harm the economy and society.

activity. however, in order to increase investment activity, boost job creation and raise productivity growth, other policy areas need to contribute decisively. in particular, the determined implementation of product and labour market reforms as well as actions to improve the business environment for firms needs to gain momentum in several countries. it is crucial that structural reforms be implemented swiftly, credibly and effectively as this will not only increase the future sustainable growth of the euro area, but will also raise expectations of higher incomes and encourage firms to increase investment today and bring forward the economic recovery. fiscal policies should support the economic recovery, while ensuring debt sustainability in compliance with the stability and growth pact, which remains the anchor for confidence. all countries should use the available scope for a more growth - friendly composition of fiscal policies. we are now at your disposal for questions. bis central bankers ’ speeches