stress is that control activities need to be an integral part of the daily operations of an institution. examples of this include : top level reviews of performance and risk exposure ; appropriate activity controls that monitor performance and exceptions at the departmental or divisional level ; segregation of duties ; physical controls on access to assets ; periodic checking for compliance with exposure limits ; a system of approvals and authorisations for transactions over certain limits ; and a system of verification and reconciliation of transaction details and activities. the objective should be to ensure that all areas of the institution are continually in compliance with established policies and procedures. on information and communication, it should be self - evident that an institution needs comprehensive and timely financial, operational and compliance data, and so needs to have good information systems. but having the information is only the first step. equally important is the second step, that the information should get to the right people at the right time. finally, on monitoring, it cannot be overstressed that that monitoring of the effectiveness of an institution ’ s internal controls should be a continual and ongoing process, and that monitoring of key risks should be an integral part of the daily operations of the institution. effective and independent internal audit and compliance functions have an important role to play here. this requires these functions to have direct access to senior levels of the organisation so that potential criticisms of systems or transactions cannot be blocked by the line management concerned. these, then, are what i would regard as the key elements of a financial institution ’ s internal controls. as regards how these are applied to individual institutions, my expectation as a banking supervisor is that any financial institution, regardless of size, should have an effective system of internal controls that is consistent with the nature, complexity, and risk of its activities and that responds to changes in the institution ’ s environment and conditions. i am not saying that i expect every institution to be using state - of - the - art risk management and control techniques. but what i do expect is that every institution should have control systems that adhere to the basic principles i have just discussed, and which are as state - of - the - art as they need to be given that particular institution ’ s activities. i also expect these systems to be kept under review as things change. let me now move on to discuss some of the things that can go wrong when controls break down. i will not go into particular case studies, but will try instead to draw together some of the common threads of recent problem bank cases. the bas

andreas dombret : the first six months of european banking supervision – an nca ’ s perspective speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the ilf ( institute for law and finance ) conference on the banking union, frankfurt am main, 4 may 2015. * 1. * * introduction ladies and gentlemen thank you for inviting me to speak at today ’ s ilf conference on the banking union. it is a great pleasure to be here. and again, the ilf has shown impeccable timing : it is six months to the day since we erected the first pillar of the european banking union. for on 4 november 2014, the ecb became the direct supervisor for the 123 largest banks in the euro area. together, these institutions account for more than 85 % of the aggregate total assets of the euro area ’ s banking sector. that makes the ecb one of the world ’ s biggest banking supervisors. yet the ecb is not walking alone ; it is being accompanied by the national supervisors. ultimately, european banking supervision rests on the shoulders of both the ecb and the national supervisors. let me therefore share with you my view, as a national supervisor, of the first six months of european banking supervision. 2. the benefits of european banking supervision shifting banking supervision from the national to the european level harnesses three specific benefits. first, european banking supervision makes it possible for banks throughout the euro area to be supervised according to the same high standards. these standards will emerge from sharing insights and empirical findings internationally, and from adopting best practices from each national approach to banking supervision. the option of conducting cross - border peer reviews is another way in which the goal of establishing a common set of high standards can be achieved. second, european banking supervision makes it possible to effectively identify and manage cross - border problems. this is essential, because large banks usually operate in more than one country. the failure of the franco - belgian bank dexia in 2011 is a classic case in which banking supervision with a cross - border focus could have improved crisis management. another example is germany ’ s hypo real estate, which folded in 2009. third, shifting banking supervision from the national to the european level adds a layer of separation between supervisors and the banks they supervise. this will prevent domestic supervisors from handling their banks with kid gloves out of national interest. at a more general level, the ultimate forte of european banking supervision is that it blends