yves mersch : keynote speech euro finance week keynote speech by mr yves mersch, member of the executive board of the european central bank, at the 18th euro finance week 2015, frankfurt am main, 18 november 2015. * * * ladies and gentlemen, it is my pleasure to welcome you to the euro finance week and to today ’ s three conferences. depending on which conference you will be attending, you will be focusing on target2securities, payments or the digital revolution in banking. however, clearly, all three of these topics are very closely related and are all big issues right now in europe and for the eurosystem. this morning, i would just briefly like to mention two big initiatives in europe for which each of these three topics are highly relevant : the capital markets union and the eurosystem ’ s vision for 2020. initiative 1 : cmu the capital markets union, or cmu, will boost private risk - sharing across borders, making public risk - sharing less necessary and giving greater protection to taxpayers. the ecb and the eurosystem fully support the development of a european capital markets union and welcome the action plan published by the commission on 30 september. in this action plan, the commission has detailed the concrete steps needed to achieve the goal of cmu. of course, one ingredient that is essential for capital to flow quickly and efficiently around europe is a strong market infrastructure. this is where the eurosystem has already laid the foundations for the capital markets union with the development of target2 and, most recently target2 - securities, or t2s. target2 is the long - established interbank payment system processing cross - border payments in real time. t2s is europe ’ s new single securities settlement platform. it went live on 22 june of this year. t2s moves us closer to the goal of cmu because it enables banks to hold a centralised pool of collateral, making it easier to move capital around to where it needs to be. the post - trade harmonisation agenda that accompanied the development of t2s has also removed many of the barriers to efficient cross - border clearing and settlement – with many of the remaining ones having been taken up under the commission ’ s action plan. the financial crisis hit the financing of smes particularly hard. this is why the ecb and the commission are fully behind measures that make it easier for the european sme sector to gain access to financing. in addition to the cmu proposal, other

thailand has signifcantly benefited from the increasing coordination between supervisors and external auditors. despite these benefts, there are several challenges ahead in our relationship with external auditors that merits careful deliberation. first, supervisors should be sensitive to the independence of the external auditors, particularly when the auditors provide various types of consulting services to the bank, which often times may be far more lucrative than external auditing fees. in thailand, the ministry of commerce released a ministerial regulation in 1991 to prohibit external auditors from providing auditing services to any entities where their independence cannot be maintained. however, this regulation still leaves the assessment of independence to the external auditors themselves. if necessary, regulators may consider limiting the scope of non - auditing services or requiring the auditors to submit a request for approval prior to engaging in non - auditing activities in the same entity that they provide auditing service. one good example is the sarbanes oxeley act, which was issued in the u. s. in 2002 disallowing audit firms from providing specifc functions to their audit clients such as bookkeeping, financial information system design and appraisal service, etc. second, the work of the auditors should never replace supervisory responsibilities. audited financial statements are not prepared to serve supervisory purposes and external auditors are not trained as bank supervisors. accounting policies and definitions used by auditors may be different from those required by supervisors under thai regulatory standards, although in general they tend to be the same. for example, there are differences between supervisory guidelines and accounting requirements on asset classification and provisioning. whereas the supervisory guidelines prescribe minimum specific ratios of loan provisions depending on the quality of loans, the accounting standard is less specifc and only requires banks to set aside appropriate provisions. second, the method used by regulators to set aside provisions is based on an “ expected loss model ”, while the accounting standards require provisions based on an “ incurred loss model ”. these conceptual differences can lead to different outcomes on such critical issues as the volume of classified asset, the adequacy of provisions, and therefore, capital adequacy. it ’ s useful to be mindful of these differences and understand the context that leads to the need to maintain these differences. in closing, i want to reiterate that external auditors have truly been one of our key partners in the quest for greater financial stability. thailand ’ s financial industry is currently in the midst of structural