the commission ’ s proposal and supporting impact assessment. they give a profound base for fruitful discussions on the intriguing topic of structural reform. it deserves a fair debate and parliamentary discussion. i am happy that the negotiations have already started in the council working group and are scheduled to continue throughout the summer. but naturally the pace will pick up only in the autumn, when the new commissioner and commission have been selected and the new parliament starts its work. the proposed regulation would give the authorities powers to implement a structural reform that would prevent depositor protection from becoming an incentive for banks to engage in excessive risk - taking. together with the eu framework for bank recovery and resolution and the single resolution mechanism, the proposed regulation would reduce the pervasive too - big - tofail and too - complex - to - fail problems also among the largest and most trading - intense banks in europe. moreover, i think it is safe to say that the simplification of the large, complex european banks would facilitate the task of the single supervisory mechanism. if consistently implemented, structural reform would improve market discipline and redirect the european banking sector towards better serving the real economy. [ slide 29 – measures are needed to improve market discipline ] we need to take the necessary actions to achieve financial sector stability while ensuring economic sustainable growth and prosperity in the eu. [ slide 30 – on the role of banking ] thank you! bis central bankers ’ speeches

do. [ slide 16 – contribution of banks to systemic risk ] according to this important report by asc additional policy measures are needed to “ reduce excessive private credit creation by banks and mitigate its risks, re - balance the eu ’ s financial structure away from banks and mitigate the risks from banks ’ “ non - bank ” activities ”. among the additional policy measures the report also recommends the implementation of structural reforms. the group ’ s proposal for mandatory separation i take these recent reports as providing important support for our work in the high - level expert group on reforming the structure of the eu banking sector. in october 2012 we proposed mandatory separation of a deposit bank and a trading entity within the banking group to complement, not substitute the ongoing regulatory reform. two avenues as alternative ways forward were considered in the group. we came to the conclusion that structural reform is needed. [ slide 18 – two alterative avenues ] the motivation for our decision was the following : international monetary fund ( 2014 ) global financial stability report, chapter 3 : how big is the implicit subsidy for banks considered too important to fail? esrb ( 2014 ) is europe overbanked? reports of the advisory scientific committee no. 4 / june 2014. bis central bankers ’ speeches [ slide 19 – rationale for mandatory separation ] 1. we wanted to limit the spill - over of benefits from the deposit guarantee system and any implicit government guarantees to certain trading activities of banks. without separation, the explicit and implicit guarantees would distort the market mechanism and spur the deposit banks to unhealthy risk - taking and expansion in their trading activities. 2. we saw the need to simplify the structure of large, complex banks. reducing complexity by means of separation facilitates management and implementation of incentives and it facilitates supervision and monitoring by outside stakeholders such as shareholders, bank creditors and other market participants, thus reinforcing market discipline. this will reduce the probability that the bank gets into trouble in the first place. 3. if a bank would nevertheless get into severe problems, it is easier to impose recovery and resolution measures if the structure of the bank has been simplified ex - ante. it is crucial to make credible the resolution also of the largest and most trading - intense banks in europe. 4. we saw the need to shield the deposit taking bank from excessive risk - taking in trading activity and from exposures to entities in the shadow banking system. 5. we emphasised the need to reduce the mixing of two very different management cultures in