their actions. the second success factor is common decision - making at the european level. both mechanisms have a single european decision - making body : the supervisory board prepares the supervisory decisions to be decided by the governing council in the ssm and the single resolution board prepares the resolution decisions to be taken by the european commission, if we consider the proposal currently on the table. as a result, and even if we have changes in the srm, it is key that we remain in each of the mechanism with a single body at the european level that will be ultimately responsible for decision - making. the third factor is common tools : both ssm and srm will have their respective single tool box to achieve their mandates. for the ssm this refers to the harmonised supervisory powers of the single rulebook provided for by the crdiv / crr, even though the many options and prudential filters at national level with phasing - in allowed in some cases until 2029 need to be addressed. in addition, the ssm will make use of a supervisory manual to ensure harmonised supervisory practices across participating member states. in the case of the srm the harmonisation of resolution tools is provided for by the bank recovery and resolution directive. in its resolution activity, the srm is foreseen to have access to a single resolution fund, which should be financed by the industry itself. therefore, it is essential that discretion – when it is required for objective reasons – ought to be applied at the central level. otherwise there is the risk of re - fragmentation under the pretext of national particularities. if these three success factors are put in place, the banking union can achieve its long - term objective : to create a single financial market. this would enable a creditworthy firm or household to get a loan from any bank in the union at comparable conditions – and location considerations would not be predominant. in this way banking union is a central safeguard against fragmentation. banking union will also be pivotal for the smooth functioning of monetary union because it will help to repair the monetary policy transmission mechanism. however, progress on the bis central bankers ’ speeches other three pillars to accompany monetary and banking union – fiscal, economic and political union – is also needed. establishing the ssm i would like to use the opportunity to address in more detail two issues related to the establishment of the ssm. as mentioned before the ecb will conduct a comprehensive assessment of banks ’ balance sheets before officially taking up the new supervisory task

. i will now focus on the first feature of the crux, the pitfalls on the climb towards recovery. i see three main pitfalls that may slow down the process of defragmentation or even reverse it : • competitiveness differentials across member states, • public and private deleveraging, and • institutional barriers in financial markets. in the following i would like to address each of the pitfalls one by one. competitiveness differentials across member states competitiveness differentials within the euro area – but also globally – are a challenge because they can lead to macroeconomic imbalances. the recent crisis has taught us a al - eyd, a. and berkmen, s. p. ( 2013 ). fragmentation and monetary policy in the euro area, imf working paper wp / 13 / 208. bis central bankers ’ speeches lesson how imbalances can put financial stability at risk. therefore, it is important that existing imbalances are corrected. in this respect i see remarkable progress in some areas. all periphery countries have recaptured some of the losses in competitiveness that had been incurred previously. there is no single best indicator of competitiveness, as there are many dimensions to this concept relating to both price and non - price factors. this notwithstanding, nominal unit labour cost developments provide a good indication of the extent to which an economy can effectively compete in terms of labour costs. but we should also focus on institutional competitiveness, that is to say the quality of governance, the cutting of red tape and efficiency of tax systems. these aspects have also formed part of the adjustment programmes that some countries are going through. overall, it is important to realise that one reason for the need to implement adjustment measures was a lack of action in the time before the crisis. it is not “ austerity ” that leads to weak growth, but structural weaknesses and low growth potentials caused the need for consolidation. 2 meanwhile we can see encouraging signs that these measures are bearing fruit. stressed countries such as ireland, spain or portugal – but also other euro area countries – have shown significant current account improvements. greece has improved its current account position by over 14 percentage points since 2008. at first, only imports decreased but lately also exports have grown. those countries that have reformed are being rewarded twofold : by their own success and the solidarity and support by the european community. as a result, imbalances within the euro area have decreased. hence, the financial stability risks emerging from