. c., 10 april 2014. bis central bankers ’ speeches the crisis. 5 the situation had long required bold institutional reforms to the design of monetary union and we should praise the european commission for having quickly prepared proposals for a banking union in 2012. the banking union must be instrumental in resolving the crisis in my view, the banking union must be instrumental in resolving the crisis and unravelling its legacy. it is the crucial node to secure both financial integration and stability. the reason is clear. in the euro area, about 75 % of the real economy ’ s financing needs still originate from the banking sector. what is more, banks are crucial counterparties in the broader system of financial intermediation. therefore, the importance of establishing the single supervisory mechanism and creating a level playing field for all banks across europe cannot be overemphasized. 6 a relevant part of this endeavour is the comprehensive assessment of bank´s balancesheets that will precede the beginning of the supervisory tasks by the ecb / ssm. aiming at completing the balance - sheet repair of the banks subject to the ssm it will improve their capital and solvency position. in spite of the recent credit negative behaviour being mostly the result of lack of demand, the enhanced robustness of banks will overcome remaining credit supply restrictions that could hamper the recovery. this process of repairing the banking system is only one part of the challenge policymakers face in europe. the other, more fundamental part is to build a safer and more resilient financial sector that serves the real economy. this is ultimately the objective of the next phase of banking union : building a single european supervisor via the single supervisory mechanism ( ssm ). there are four ways in particular i expect the ssm to make a difference to banking in europe : by improving the quality of supervision ; by creating a more homogenous application of rules and standards ; by improving incentives for deeper banking integration ; and by strengthening the application of macro - prudential policies. the ssm should create the conditions and incentives for deeper integration of the european banking market, which should in turn make the euro area less vulnerable to fragmentation. barriers that existed in the past to deeper retail banking integration, for example opaque supervisory approval procedures, will no longer be relevant with a single european supervisor. the substantial compliance costs that came from having to observe different sets of rules and interact with several different authorities should also be reduced. at the same time, the benefits of cross - border integration should

stockholdings. concluding remarks while i have been talking about the challenges for japanese financial institutions, the recent crisis left various lessons for the regulatory and supervisory authorities as well as central banks. in relation to ensuring financial system stability, one lesson might be that “ it is important to gauge with a sharp distinction between micro - level risks, such as risks of individual financial institutions, and risks of the financial system as a whole. ” by taking that point into account, the importance of the so - called macroprudence – which aims at accurately gauging the risks of the financial system as a whole, with due recognition of the relationship between economic activity, financial markets, and financial institutions, and taking necessary policy responses – has been increasingly recognized on a global basis. in that regard, the bank of japan has been, from a standpoint of conducting monetary policy, monitoring a wide range of economic and financial developments at home and abroad and making in - depth research and analyses, as well as striving to improve infrastructure, including financial markets and the payment and settlement system. in addition, the bank has been gauging business conditions of individual financial institutions through on - site bank examination and off - site monitoring, and information and perspectives obtained through such processes have been utilized in gauging the condition of the financial system as a whole and in risk analyses, and published in the financial system report. also, the bank took measures such as purchases of banks ’ stockholdings and provision of subordinated loans aiming at ensuring the stability of the financial system as a whole. the bank has thus been making various efforts on the macroprudence front. nevertheless, such efforts are only half done. for example, gauging macro risks is still not sufficient. from a viewpoint of strengthening macroprudential analysis, the bank has been trying in the financial system report to broaden analyses to businesses other than banks, for example, insurance companies, to gauge macro financial imbalances, and to expand stress testing, but those efforts still remain at a stage of trial and error. in addition, the bank is aware that, even if the macro risk is properly gauged, it still remains as a future challenge to examine what specific policy measures would be desirable to address the risk. the bank will, including the responses to the challenges i have mentioned, continue with the efforts to ensure stability of the financial system.