this is all the more relevant in the banking union, where banks supervised by the single supervisory mechanism ( ssm ) are still subject to different accounting systems. in this area, progress is highly desirable and as a first step, i would support an initiative aiming to assess the quality and degree of comparability of national accounting standards and to promote further convergence. ( iii ) third, it remains necessary to ensure financial stability in the long run. the shift towards more market - based financing would entail several implications from a financial stability perspective. the development of alternative sources of funding, outside the banking system, brings a necessary diversification. yet the risks associated with disintermediation are clear, notably a limited assessment 3 of risks by investors or less ability to address difficult situations and gaps in supervision. in parallel, re - intermediation by non - banks raises level - playing field questions linked with uneven regulation and supervision across sectors and countries. the objectives of the capital markets union should serve as a backbone to the regulatory efforts made at the european level. before adopting new pieces of legislation, it is of utmost importance to thoroughly examine their impact. even though the analysis of the cumulative impact and the interactions between regulations is still in its early days, vigilance is required to ensure that the implementation of reforms does not result in a reduction of financial activities, such as market making that are vital for preserving market liquidity, financing investments and firms and ultimately the real economy. the foreseen banking structures reform and european financial transactions tax ( eftt ) are cases in point. in both projects, an appropriate approach should strike the right balance between limiting risks associated with trading activities and the need to preserve financial activities that are useful if not essential to the development of the real economy. doing so would be fully compliant with the overarching objectives of the capital markets union. bis central bankers ’ speeches having better integrated markets within the european union ( eu ) would also mean the emergence of more reciprocity issues as regards macroprudential policies. at the macro level, authorities should then closely review the potential additional vulnerabilities and risks attached to the cmu both at the domestic level and on a cross - border basis. authorities will also have to strengthen their analytical framework and possibly complement their macroprudential instruments which are mainly bank - based at the current juncture. i will conclude with some remarks regarding longer term work, namely how to harmonize further domestic legal regimes and the institutional architecture

become smaller. reasonable people can debate whether or not it is sensible for this element of provisions to be so sensitive to risk - free rates, and it may be that once we are into a solvency ii world some firms will choose to hedge this exposure. however, that debate is for another day : the risk margin and its calculation are part of the law and our job is to implement it. more specifically, the directive is clear that the solvency capital requirement ( scr ) and the risk margin are separate concepts : put simply, firms have to survive a 1 - in200 stress, using the capital held to meet their scr, and then have the risk margin available to provide for the costs incurred in an orderly transfer of liabilities. it is obvious that in this respect solvency ii is more demanding than the icas regime, even if other elements of the regime are not. a related source of tension is our use of the quantitative indicator ( qi ) framework as part of our assessment of internal model applications. this framework describes a set of judgements, based on evidence and analysis that provide an assessment of the most common risks faced by uk insurers, such as longevity risk for life insurers, and how they relate to each other. many of the areas covered by the framework involve a significant degree of judgement, and accordingly we are flexible in how we use the framework and consider it just one input into our consideration of whether firms ’ models meet the tests and standards for approval under solvency ii. the way we use the qi framework has also been, and continues to be, informed by evidence and practices presented to us by firms. however, it would be odd indeed if a regulator ( or a firm for that matter ) were to change their view of conditions in the real world because of a change in regulatory regime. clearly, despite the lofty ambitions of european legislators, the move from solvency i to solvency ii doesn ’ t change how long people will live for, or the probability of a north american windstorm. so our beliefs about the nature of the risks to which insurance companies are exposed will persist as we move into the new regime. but the regime requirements are different, and we will embrace that change. people should not confuse these two things. adapting to the new regime solvency ii introduces some important reforms to modernise the regulatory regime for insurers in the uk. but a sudden implementation of these changes by firms, and particularly on the life side given