08. 10. 2020 banking resolution : firm foundations for stability srb conference 2020 / session ii : resolution planning under the banking package : continuity and innovation pablo hernandez de cos governor good afternoon, ladies and gentlemen. let me begin by thanking the organisers, and the srb chair in particular, for giving me the opportunity to participate in this conference. five years have passed since the single resolution board was established as the resolution authority within the banking union. that is certainly a short time by institutional standards but, looking back, i would argue that the progress made has been significant. under the leadership of its chair, elke konig, the srb has finalised resolution plans – along with their mrel requirements – for all significant institutions. it has likewise fostered their resolvability, and has put in place effective mechanisms for cooperation with the national resolution authorities. all these arrangements have already proved their effectiveness. from a broader perspective, i would also argue that a more robust european crisis management environment has been conceived. harmonisation of procedures not only strengthens the banking union as it is ; i am sure it will also prove essential in future crossborder consolidation initiatives. bail - in has aligned incentives for managers and creditors alike in reducing excessive risk - taking. and, as a much wished intangible asset to a central banker like myself, the existence of a single fund is another milestone, partially mutualising risks in the euro area, which is moving forward with a more complete monetary union. all in all, if, as we are often emphasizing during this crisis, the post - crisis reforms have mitigated the risks to the sector ’ s financial stability, the implementation of the resolution framework has contributed to strengthening the banking sector in a crucial manner. identifying gaps for a more robust resolution framework in the eu accepting that we have made great advances in this field, we have to acknowledge also that there is still some way to go before we can truly assert our journey is over. first of all, it is important to recall that the european resolution framework is one of the three pillars of the banking union and it is essential to develop the third one – the much needed european deposit insurance framework – to ensure the resilience and well - functioning of this banking union. as this matter goes beyond the scope of this conference, i will rather concentrate on the second pillar of the banking union. so, entering into this resolution pillar, there are certain areas on which both policymakers and practitioners should concentrate

##s and bridge the transparency and accountability gaps. doing so would, i believe, leave central banks even better - informed and better - placed to deliver their core mandates in future. here is why. correcting the deficits my answer comes in two, inter - related, parts. let me take these in turn. first, building understanding among the general public in the economy, financial system and central banks. most people would think an improved understanding of the economy among the general public is desirable. it makes for improved decision - making by people on important everyday decisions on spending, saving, borrowing and working. the better those individual decisions ( the micro ), the more stable the economy and financial system are likely to be ( the macro ). improved public understanding of the economy is in that sense win - win, benefitting policymakers and the public alike. but it is possible the benefits of improved public understanding in stabilising the economy and financial system have been underestimated. “ popular narratives ” among the public might be more important in driving macro - economic behaviour than in the past. and these narratives may be more prone to destabilisation than in the past. if so, too little may have been invested historically, by both the public and policymakers, in informing these narratives and hence stabilising the economy. public understanding of the economy and finance starts from a low base. you do not have to take my word for it. that is the strongly - held view of the public themselves. in surveys, almost half of the public say they believe they lack an adequate understanding of economic and financial issues when making crucial everyday decisions. this is a weak endowment. we now know quite a bit about the costs to individuals of this weak endowment, which appear to be large and long - lasting. for example, poor levels of financial education have been shown to have large and lasting effects on individuals ’ health – financial, physical and mental. financial illiteracy is a recipe for debt, default and depression, whose effects appear to feedback on each another in a vicious spiral. fca ( 2017 ). richardson et al ( 2017 ), earwicker ( 2016 ). all speeches are available online at www. bankofengland. co. uk / speeches these individual costs are amplified when they are aggregated up to the macro level. how people ’ s expectations evolve – their degree of optimism or pessimism, exuberance or depression – is crucial for determining their individual decisions. it