vitor constancio : establishment of the single supervisory mechanism – the first pillar of the banking union opening keynote presentation by mr vitor constancio, vice - president of the european central bank, at the 11th annual european financial services conference “ reshaping europe ’ s financial markets ”, organised by forum europe ltd., brussels, 31 january 2013. * * * ladies and gentlemen, it is a great pleasure to be here today. the crisis has made it clear that a highly interconnected and integrated area such as the euro area, and a genuine economic and monetary union needed a stronger institutional framework. an important element to strengthen the financial institutional framework is the creation of the banking union with the single supervisory mechanism ( ssm ) representing its first pillar. during my intervention today i will touch upon the different elements of the banking union and the underlying rationale for its establishment. subsequently, i will review the main features of the ssm and mention the immediate challenges for the ecb to prepare itself to assume its supervisory task. 1. the key building blocks of a banking union the banking union aims at building an integrated financial framework to safeguard financial stability and minimise the cost of bank failures. it consists of four complementary building blocks, of which the ssm forms an integral part. the establishment of a european framework for supervision forms the first pillar of the banking union. as implied by its name, the ssm will be a mechanism, composed of national competent authorities and the ecb, with possibility of non - euro area member states to participate. the process to establish the ssm is underway, with the council proposal forming the basis for the current trialogue with the european parliament. i am quite pleased with the council ’ s proposal as it lays down a robust legal framework for the ssm to operate in. in order to ensure a timely implementation it is now of the essence that the proposal is enacted as soon as possible. an important element that will be supportive to the effectiveness of the ssm, is the completion of the single rulebook whose implementation is overseen by the eba. the completion of the single rulebook will significantly contribute to the single market and towards creating a level playing field by harmonising regulation at the european union level. likewise, the ssm will also contribute to these same goals. a second element of the banking union is the establishment of a single resolution mechanism. the framework for the single resolution mechanism is still to be defined and i look forward to the commission ’ s

me generally a good thing that ( 1 ) more of the credit risk is borne by entities or forms of financing generally less characterised by leverage ; and ( 2 ) those entities that do have leverage ( i. e. banks in the main ) have less leverage than they used to. such developments lessen the system's tendency towards crisis ; resilience is greater. that said, all of this is still a work in progress and more progress is required. on the domestic front, the information we have received recently suggests that the australian economy was growing at a respectable pace in the second half of last year. the national accounts data released this month showed that the economy expanded by 3 per cent over 2015, a bit better than we estimated at the time of our most recent statement on monetary policy in february. this outcome seems to fit together with other pieces of information such bis central bankers ’ speeches as business surveys and labour market data, which improved noticeably over the course of 2015. so at the turn of the year the australian economy seemed to have been picking up. that's a good starting point. in the case of business surveys, better conditions seem generally to have continued in the early part of 2016, though labour market data have been more ambiguous. the fact that australia has a sound and credible macroeconomic policy framework, which could, if needed, respond as appropriate to significant negative events is also a good starting point. even with interest rates at already low levels, and public debt higher than it was, there would, in the event of a serious economic downturn, be more room to ease both monetary and fiscal policy than in many, indeed most, other countries. leaving aside the potential for macroeconomic policy responses, the economy's inherent ability to adjust has been on display through both phases of the mining boom. of course we should always be looking for ways to improve that flexibility, but i think it should be said that businesses and their workforces have been much more flexible than once used to be the case. turning to financial resilience, australian banks'asset quality has generally been improving over the past couple of years. like their counterparts abroad, in the post - crisis period the banks have lifted capital resources, strengthened liquidity and reduced use of short - term wholesale funding. so their ability to handle either a funding market shock or an economic downturn has improved compared with the situation in 2008. at this stage we do not see a material problem in australian financial or non - financial entities