jorg asmussen : cooperation and diversity – principles for a stable euro area acceptance speech by mr jorg asmussen, member of the executive board of the european central bank, at bocconi university on the occasion of the award ceremony “ alumnus of the year ”, milan, 25 october 2013. * * * dear professor monti, dear mario, dear professor sironi, dear mr guindani, ladies and gentlemen, i was a bit surprised when my assistant told me that professor monti would like to have a telephone conversation with me. i thought, when the former italian prime minister wants something from the ecb, why doesn ’ t he call the other “ super mario ”, the ecb president. but i returned his call immediately, of course. surprise and joy were tremendous when he informed me about the decision of bocconi university to grant me the award “ alumnus of the year 2013 ”. i feel very honoured and i am very grateful to receive this award and i see it as an obligation for the future at the same time. i would like to thank mario monti for his very kind introduction. it is generous of mario to say repeatedly that he knew me during my mba here in 1991 - 92, but i suspect there was some asymmetry in the relationship. i was a student and he was the rector, so i think it was rather that i knew him! my choice to study an mba degree at bocconi may have had something to do with the old german craving for italy. if there is such thing as an emotional relationship between peoples, then for sure between germans and italians, just think of goethe ’ s italian journey and the quest for arcadia and, on the other hand, the long - standing italian admiration for german efficiency and our sense of order. the time i spent at bocconi i look back on with great fondness. it was a privilege to study in one of the great seats of learning in italy and europe. and i see this period as one that helped forge the views that later served me as a european civil servant and policy - maker. when i studied here aged 25, i was coming from northern germany with little first - hand experience of other cultures besides the danish one. but being here at bocconi changed all that. it was a truly multicultural environment, with students from 26 different nations from around the globe, working side by side. i shared a flat with two turkish students. all these experiences taught me some key

little cooperation and too much diversity – we lacked a coherent european approach to financial sector policies. but there is clearly scope for more cooperation today as, particularly after the experience of the crisis, preferences are more aligned in europe. we all want banks that are well supervised and that can be resolved at minimum cost to the taxpayer. to achieve this, i think we need not reinvent the wheel. there are elements of the us approach that have worked and that we can usefully borrow in europe. these fall into two basic categories : first, what i call the us ’ s “ public banking union ” – its federal institutions for dealing with banking crises. second, what i dub its “ private banking union ” – its integrated financial market that dissipates the costs of crises. public banking union clearly, the key difference between europe and the us is that banking problems in the us have been mainly taken care of at the federal level, whereas in europe responsibility for troubled banking has thus far remained national. during the crisis in the us, it was federal institutions that stepped into the breach. the federal deposit insurance corporation ( fdic ) resolved 490 unviable banks, using resources from its deposit insurance fund financed by all the banks. the us treasury provided recapitalisation support and guarantees through its troubled asset relief program ( tarp ). the federal reserve undertook a thorough stress - test, determining banks ’ additional capital needs. to understand the situation we are in in europe, it is useful to make a thought - experiment, and imagine that no such federal institutions exist in the us. imagine that the state of california would have had to come up with the tarp money for wells fargo instead of the us treasury. imagine that the state of new york would have had to provide the guarantees to citigroup. think about how the markets would have treated these states? and how they m. monti and s. goulard, democracy in europe ( 2012 ). bis central bankers ’ speeches would have treated these banks? the lesson for the euro area is clear : federal institutions can prevent local crises from becoming systemic. in europe, we do not yet have these federal institutions that can act as shock absorbers. so far, responsibility for dealing with bank problems lies exclusively with the individual eu countries. the result is that – to quote an ft editorial – “ national taxpayers subsidise banks implicitly in good times, explicitly in bad times, and suicidally in a sovereign debt crisis ”. indeed