area from banks ’ exploitative potential. in addition, the ssm was designed to harmonise supervision, eliminate home biases, alleviate cross - border supervision and get an early and reliable overview of emerging risks – in short, to enhance the path towards a fully integrated financial sector in europe. the ssm was doomed to be successful because it had to be a key servant of financial stability as soon as it came into being. it also attracted attention because it had potential to serve as a compass for europe. moving together – is it working? after one year of the ssm, it is about time for a review. 2. components of the ssm ’ s success one year after its establishment, i can confirm that the launch of the ssm has been a success. but its success goes beyond a mere change of supervisory responsibilities. bis central bankers ’ speeches harmonisation and quality enhancement got underway beforehand with a comprehensive assessment that made sure that banks were well - capitalised from the outset. take a look at german banks – we witnessed recapitalisation even before the comprehensive assessment was carried out in 2014. in other countries, an overall € 25 billion capital shortfall had to be straightened out as a result of the comprehensive assessment. corrections to banks ’ assets worth € 48 billion and harmonisation of the definition of non - performing loans ( leading to corrections of € 136 billion ) also made clear that the need for harmonisation was truly significant and that the new supervisory player was recognised as a serious authority from the beginning. putting such “ hard facts ” to one side, we are also seeing the benefits of the new regime in our daily business. there are 123 joint supervisory teams – or jsts for short – for those banks that are directly supervised by the ecb. bundesbank supervisors are participating in 22 jsts for german banks as well as in 12 host jsts for foreign banks. this multinational interaction noticeably helps preclude home bias. however, we cannot rule out the continued existence of some preconceptions because they may be unintentionally masked by habits and different attitudes towards supervision. but a cross - national dialogue is probably the most productive way to discover and discuss partial supervisory routines. furthermore, a level playing field and cross - border supervision are facilitated within the ssm area. of course, the european single rulebook and the european banking authority have their part to play in this development. but when it comes to the cross - border supervision of a banking group, institutional

return to capital can be derived as gr = ga + ( 1 - a ) ( gl - gk ), where ga, gl and gk are the growth rates for total factor productivity, labour and capital, respectively. the relevant factor in the present context is the return to capital ( the flow of income to owners of the capital stock in relation to the value of the stock ) because this should be linked to the growth of corporate earnings. the return to that the trend rate of gdp growth has to move up from around 2 % to an annual rate of 5 % over a considerable period. thus, we are talking of a marked upward shift in the growth trend that has not yet occurred in sweden. neither has such high growth been mentioned in the united states, except perhaps for a single year. the discussion there does, however, concern the possibility that the trend or potential rate of growth has risen. that would then point to some increase in the growth of corporate earnings in the united states. why are asset prices relevant for central banks? if asset prices and the growth of credit in an economy are based on unrealistic expectations of future prospects, the result is liable to be a financial bubble. under normal circumstances, rising asset prices add to the value of collateral and thereby strengthen the borrowing propensity of investors and the lending propensity of banks. an upward trend in asset prices is therefore often accompanied by an expansion of credit. in sweden, for example, in the five - year period up to the early 1990s, real asset prices had risen more than 70 % and private sector debt relative to gdp had grown from 100 % to 150 % ( fig. 5 ). bubbles burst sooner or later, with consequences for the financial system and the economy in general that may be grave. that is one reason for central banks to take an interest in stock market trends. today, however, the situation in sweden does not resemble what happened in the second half of the 1980s. asset prices have certainly risen strongly in recent years but credit has not grown to the same extent. it seems that, at least to date in the present upswing, swedish banks and their customers have taken a different line on the provision of credit and borrowing. everyone is hopefully more accustomed to a deregulated credit market than was the case in the late 1980s. still, it is important to be alert to the future path of asset prices and credit aggregates, as well as to the underlying forces at work in the