to regard the decision of the mediation panel as binding. the problems i have just set out highlight the crucial importance of a principle which the founders of the eurosystem were keen to safeguard : the independence of the ecb, and of its governors. if the governments decide to mandate the ecb with additional tasks, this basic principle still applies, as long as the treaty is not changed. thus, if the ecb is mandated with banking supervision, the governing council of the ecb will be the one deciding on all relevant supervisory matters, as long as there are no changes in primary law. this implies that – following a common principle of reason – those responsible for a decision need to be able to shape that decision. bis central bankers ’ speeches 4. conclusion let me sum up my main points. the single supervisory mechanism is a good step forward towards improving the european institutional framework. there is no doubt about that. however, the envisaged institutional set - up needs to take into account a basic feature of the eurosystem – the independence of the ecb and of the members of the governing council. hence i am not only looking forward to working with my supervisory colleagues within the ssm, but also to reading the final regulation governing the new system. thank you for your attention. bis central bankers ’ speeches

in order to insulate banks from weak public finances, we need not only appropriate supervision but also suitable regulation ; regulation that will prevent banks from taking on excessive risk through state financing. such regulation should, for instance, include upper limits for lending to governments. it should also encompass appropriate capital backing for government bonds – which is another proposal made by stefan gerlach, incidentally. but the single supervisory mechanism and suitable regulation are just two elements of a banking union, and there are also other means available for severing the link between sovereigns and banks. the third tool in this respect is a european recovery and resolution mechanism for banks that has access to “ european ” funds. in this context, it is necessary that any such mechanism ensure that investors are first in line to bear the risk of their investment decision. taxpayers must be spared the burden of other people ’ s investment decisions – at the national level and even more so at the european level – for as long as there is no proper balance between liability and control. ladies and gentlemen, i have very briefly highlighted a few arguments in favour of european banking supervision – the “ why ”, so to speak. now, let us take a look at the “ how ”. 3. european banking supervision – the “ how ” the establishment of the single supervisory mechanism will see wide - ranging banking supervisory functions being transferred to the ecb. at least seventeen countries will give up their sovereignty in supervisory matters to the ecb ; the ecb will be directly responsible for the supervision of the most systemically important banks domestically and at european level. nevertheless, national legal systems and national market structures will still be of utmost importance for the welfare and success of these banks. given the multitude of different s gerlach, a schulz, g wolff ( 2010 ), banking and sovereign risk in the euro area. centre for economic policy research, discussion paper, no 7833. bis central bankers ’ speeches supervisory traditions, legal systems and people involved in supervision, the ssm will only be successful if appropriate governance and transparent cooperation and task - sharing are installed. one of the “ hot ” topics when swiftly organising a banking supervisory function for the ecb is future cooperation between the ecb and the national supervisors. organising a european banking supervisory mechanism in such a short time firstly means building upon existing structures. secondly, supervision will only be successful if the ecb is able to benefit from cross - border comparisons, taking into account the macroeconomic and microeconomic knowledge and