further steps towards improving the business environment, reducing the regulatory burden and pursuing more growth - friendly taxation. bold and effective implementation is not just in the interest of the individual countries, it is also key for strengthening the resilience of the economic and monetary union and for supporting growth at the global level. one domain in which the euro area has been bold and determined concerns the financial sector, and more in particular the banking sector. indeed, important further progress on the road to banking union has been made since our previous imfc meeting. the ecb ’ s legal, governance and organisational infrastructure that, as of 4 november, will support the operations of the single supervisory mechanism ( ssm ), is close to being completed. the supervisory board has been fully operational since the start of this year, helping to steer this process. in less than one month from now, the ecb will be assuming full responsibility for the micro - prudential supervision of all banks in the euro area and more directly by becoming the single supervisor of around 120 significant banks. together with the national supervisors, the ecb will be enabling and facilitating coherent and consistent application of the eu single rule book across the euro area in the single supervisory mechanism. as a second pillar to the banking union, the single resolution mechanism ( srm ) will start operating in the new year, even if the single resolution board will only start exercising all of its responsibilities from 1 january 2016 onwards. based on a wider - ranging set of pertinent legal provisions in the financial regulatory domain, the banking union in europe is about to take off, barely two years after this important decision was taken by the european council. one of the elements in preparation of the banking union has been the so - called comprehensive assessment of all significant banks in the euro area by the ecb. it has been a challenging undertaking, involving almost 85 % of the total balance sheet of euro area banks, more than 6, 000 supervisors and auditors were involved in the execution of the asset quality review. an eu - wide bank stress test was added on to it. numerous quality checks at all levels were undertaken to underpin the credibility of the exercise and to ensure level playing - field conditions across the participating countries and banks. the results of this yearlong exercise, which will become available on 26 october, will substantially increase transparency of balance sheets of european banks. the exercise has already contributed to a further strengthening of the capital base of banks and for some of them further efforts will be

crisis or not hinges mainly on shortcomings in the underlying conditions. these include · weak financial sectors ; · tendencies towards nepotism, cronyism, and corruption ; · distorting bail - out expectations on the part of market participants, including moral hazard ; · insufficient information on current developments ; · insufficient surveillance by the imf and contradicting actions by other institutions ; · a disregard of advice and agreements, accompanied by poor co - operation with the international organisations. iii what are my reform proposals and how should the “ financial architecture ” be shaped? let me start with the design of economic policy. this is clearly a matter of the financial architecture as far as the fundamental characteristics are concerned. first of all : the exchange rates. the very interesting fixed - versus - floating rate debate is an issue on which there is no simple “ yes ” or “ no ” answer. the choice of an exchange - rate system can only be judged with reference to a country ’ s state of development, its economic benchmarks and its political circumstances. experience suggests that stable exchange rates are generally desirable. in some special, well - defined cases, exchange rate pegging can be useful in getting domestic inflation under control and in maintaining financial stability. in the long run, however, a country that has given priority to pegged rates must ascertain whether or not it can keep its internal flexibility sufficiently high to enable it to make all the necessary adjustments. in particular, with priority given to fixed rates, monetary policy has to be completely subordinate to the exchange - rate target. moreover, there is not much room for budgetary policy. it has to be conducted in a stability - oriented manner in order to keep up domestic and external confidence. thus, a stable exchange rate is only sustainable if the corresponding fundamentals are adequately streamlined. a pegged currency alone cannot guarantee market confidence on a lasting basis. on the other hand, if the fundamentals of a country are fairly sound, and, in particular, if monetary policy can be conducted on the basis of an " own " nominal anchor ( i. e. independently, with a strong sense of responsibility and a firm view of stability ) a floating exchange rate may support the necessary adjustments of a country that is emerging into an advanced economy. in general, with a floating rate, the room for manoeuvre will be larger. but be careful : flexible rates are not a panacea, they are not a substitute for keeping your house in order. it