banks will thus be accumulated by a central authority in future. this information, which previously only existed at the national level, can be bundled to facilitate cross - border comparisons. in this way, the supervisor should be able to identify risks faster and better in future. the single supervisory mechanism also reduces the risk of supervisors developing an all too close relationship with “ their ” banks. local knowledge is certainly of great importance in the banking business. but we should also keep an eye on possible misaligned incentives in national supervision. experiences in the united states show that local and national supervisors apply uniform supervisory standards with varying levels of strictness. 6 this is why we should do our utmost to apply rules uniformly in europe, thereby creating a genuine level playing field for banks. there are also areas in which the institutional framework can be improved for efficient european supervision. first, different tasks are bundled in the ecb. alongside its actual task of monetary policy, the ecb governing council is ultimately also responsible for supervisory issues. these relate to microprudential and macroprudential supervision, with the latter addressing the stability of the financial system as a whole. if, however, monetary policy decisions are influenced by supervisory considerations, this would significantly impact on the credibility of monetary policy. second, the non - euro - area countries in the ecb governing council are not entitled to vote. this hinders their inclusion in the banking union – and thus the integration of the banking markets in europe as a whole. central and eastern european countries, in which foreign banks have large market shares, are affected by this in particular. clear - cut inclusion of these countries in the banking union would therefore be sensible for the creation of a single banking market. third, the single supervisory mechanism is extremely complex. a stringent organisational structure with clearly defined processes and reporting channels could alleviate the ensuing frictions, but certainly not eliminate them completely. we ought to keep a watchful eye on these problems. practice will show whether they can be satisfactorily resolved within the existing legal framework. if this is not the case, then we should make the necessary adjustments. 4. will the banking union improve how risks that materialise are dealt with? but having a uniform set of standards in banking supervision is not enough. we need procedures for dealing with banks that run into difficulties. what will happen in the future if the ecb, as the single supervisor, withdraws a bank ’ s licence? how can we ensure that individual weak banks

with other institutions from their network. as such, the single rule book runs counter to the idea of a level playing field and creates problematic incentives in terms of uniformity and size in the banking sector. regulation today already takes account of proportionality to a degree. tiered standards exist in areas such as reporting, where large institutions are required to meet more frequent and comprehensive reporting standards, and supervisors largely exercise proportionality when applying the minimum requirements for risk management. proportionality is also embedded, in principle, in the eba guidelines on the supervisory review and evaluation process. but in practice i repeatedly encounter situations where the existing gradations are inadequate in my eyes. the proportionality principle is nothing new, then, but it still has not been anchored deeply enough. 4. the road to greater proportionality : a chronology that ’ s why we took action and explored ways in which the principle of proportionality could be embedded more deeply within the regulatory and supervisory frameworks. let me start by running you briefly though the events of the past one - and - a - half years. 2 / 13 bis central bankers'speeches german finance minister wolfgang schauble and his then uk counterpart george osborne moved the ongoing debate forward substantially in april last year by noting, in a joint paper, the increasing complexity of banking regulation and pointing to the excessive burden on small institutions running straightforward business models. it is a topic we at the bundesbank also feel very strongly about. hence my decision to go public with the first set of specific proposals a little while later. that november then saw the european commission likewise table its proposals for strengthening proportionality as part of the general overhaul of eu banking regulation, which is still an ongoing process. these proposals would make major changes to the small print, and i am certain that we will be able to roll out a number of meaningful initial improvements. that said, the proposals don ’ t go far enough – which is why we thought ahead. the establishment of a german specialist working group was followed by the drafting of a bundesbank paper setting out concrete measures as well as several consultations with the german central associations. the outcome of this process is a german “ non - paper ” – that is, a discussion paper – which the federal ministry of finance put before the competent expert group of the european commission in june this year. 3 / 13 bis central bankers'speeches 5. which way? when working out this common german proposal, there were essentially two paths we could take to move