andreas dombret : moving together – one year of european banking supervision speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the ese conference 2015 “ financial supervision in europe – on the right track? ”, prague, 2 october 2015. * 1. * * a courageous mission ladies and gentlemen ever since the idea of an integrated europe first arose, political convergence has been accompanied by scepticism and even by fears. how could nations and cultures with various languages, mentalities and histories develop a common understanding of government and administration? without a blueprint solution, europeans adopted a best - practice approach that is nicely captured by a quote from shakespeare : “ wisely and slow. they stumble that run fast. ” against this backdrop, the mission of a unified banking supervision network must have appeared almost illusionary. nevertheless, on 4 november 2014 it became a reality, and the ecb was designated as its leading authority, thereby becoming directly responsible for what turned out to be 85 % of banking balance sheets in the euro area. such a transition naturally involves acquiring skills and expertise : with that in mind, human resources equating to roughly 1, 100 full - time equivalents were newly appointed by the ecb. and it also meant developing administration systems and procedures from scratch. admittedly, europe has by now witnessed quite a few very influential developments on a european scale. but while the european union developed over decades and the euro was implemented as a common currency over a period of approximately ten years, the single supervisory mechanism, or ssm for short, became a fully fledged and operational organisation after around only two years of preparations. such a courageous mission could only be ratified under very specific circumstances. in fact, i believe that it was only realisable in the face of the financial and sovereign debt crises and the vulnerability of the common currency area that was revealed as a result. we experienced banks that were “ too big to fail ” and needed to be rescued. we also experienced banks that were caught in a vicious cycle together with their governments due to debt amalgamation. as a consequence, national supervisors were overburdened. good rules for the financial sector are not enough – they also need to be enforceable under bad circumstances. rules are worth little if you do not ensure that banks abide by them. therefore, one of the ssm ’ s primary goals was, and still is, to promote a trusted financial regime by protecting the common currency

area from banks ’ exploitative potential. in addition, the ssm was designed to harmonise supervision, eliminate home biases, alleviate cross - border supervision and get an early and reliable overview of emerging risks – in short, to enhance the path towards a fully integrated financial sector in europe. the ssm was doomed to be successful because it had to be a key servant of financial stability as soon as it came into being. it also attracted attention because it had potential to serve as a compass for europe. moving together – is it working? after one year of the ssm, it is about time for a review. 2. components of the ssm ’ s success one year after its establishment, i can confirm that the launch of the ssm has been a success. but its success goes beyond a mere change of supervisory responsibilities. bis central bankers ’ speeches harmonisation and quality enhancement got underway beforehand with a comprehensive assessment that made sure that banks were well - capitalised from the outset. take a look at german banks – we witnessed recapitalisation even before the comprehensive assessment was carried out in 2014. in other countries, an overall € 25 billion capital shortfall had to be straightened out as a result of the comprehensive assessment. corrections to banks ’ assets worth € 48 billion and harmonisation of the definition of non - performing loans ( leading to corrections of € 136 billion ) also made clear that the need for harmonisation was truly significant and that the new supervisory player was recognised as a serious authority from the beginning. putting such “ hard facts ” to one side, we are also seeing the benefits of the new regime in our daily business. there are 123 joint supervisory teams – or jsts for short – for those banks that are directly supervised by the ecb. bundesbank supervisors are participating in 22 jsts for german banks as well as in 12 host jsts for foreign banks. this multinational interaction noticeably helps preclude home bias. however, we cannot rule out the continued existence of some preconceptions because they may be unintentionally masked by habits and different attitudes towards supervision. but a cross - national dialogue is probably the most productive way to discover and discuss partial supervisory routines. furthermore, a level playing field and cross - border supervision are facilitated within the ssm area. of course, the european single rulebook and the european banking authority have their part to play in this development. but when it comes to the cross - border supervision of a banking group, institutional