is particularly important with regard to less significant institutions that we give national supervisors sufficient scope to account for the particular characteristics of individual institutions. supervising lsis should be a matter for national supervisors. this would conform with the principle of subsidiarity and represent the most effective and efficient solution. 5. taking decisions ladies and gentlemen, striking a balance between harmonisation, subsidiarity and proportionality is a prerequisite for reaping the full benefits of european banking supervision – and it is certainly a formidable challenge. yet there is another challenge we have to master if european banking supervision is to work. the challenge i ’ m talking about now has to do with decision - making processes. since the ecb is responsible for european banking supervision, the governing council is the highest decision - making body, not just for monetary policy issues but also for matters of banking supervision. these two areas of responsibility intersect at the banks. besides being a crucial element in the monetary policy transmission process, banks are also the object of banking supervision. this, of course, gives rise to conflicts of interest, as it creates a banking supervisor with access to central bank liquidity. in practice, a situation may arise in which the governing council might be tempted, out of monetary policy concerns, to alter decisions that the supervisory board proposed from a supervisory perspective. to minimise such conflicts of interest, a governance structure has been put in place to limit the governing council ’ s involvement in supervisory decisions. time will tell whether this structure truly helps to avoid conflicts of interest between monetary policy and banking supervision, or whether it might have been better to create an independent banking supervisor. 6. what about regulation? supervisors can only ever be as effective as the rules and regulations they apply. and in this regard, the financial crisis has exposed a number of shortcomings in the regulatory framework. amongst other things, the crisis underscored the need for a more harmonised regulatory approach – ideally one which would eventually create a level playing field for supervisors and banks alike. in europe, we have done a lot of work to meet these requirements – first and foremost by introducing the single rulebook. amongst other things, this package implements the basel iii framework and assures the harmonised implementation of the rules throughout all member states. nevertheless, there is still room for further improvement. today, european supervisory legislation offers around 150 options to choose from. and at the national level, these options have been exercised in many different ways. to be sure, sometimes

a comprehensive and impartial european perspective with the expertise and experience of national supervisors. that being said, we need to strike a balance between harmonisation, subsidiarity and proportionality if this combination is going to work. we have to embrace the benefits of supervising banks throughout the euro area according to a set of harmonised standards. at the same time, we have to implement supervisory practices that are proportionate to the special characteristics of individual institutions, and we have to build on the experience and expertise of national supervisors. bis central bankers ’ speeches with that balance in mind, let us take a tour through the day - to - day operations of european banking supervision and see where we stand. 3. supervising “ significant institutions ” the banks most immediately affected by the new system are the 123 banks that fall under direct ecb responsibility. the ecb has 1, 000 employees, most of whom are located in frankfurt, to supervise these mostly very large and complex banking groups. since these institutions are located in 19 different countries, the ecb has to rely on the support provided by the national supervisors, on their expertise and experience, on their resources, and on their presence on the ground. that is why ongoing banking supervision is the responsibility of joint supervisory teams, or jsts for short. jsts are headed by ecb staff but mainly comprise national supervisors. the bundesbank, for instance, is represented in all the joint supervisory teams for german banks as well as in a number of teams for foreign banks. altogether, supervisors from the bundesbank are represented in 34 of the 123 joint supervisory teams. you can imagine that all this requires national supervisors to adjust – not just from an organisational point of view, but also from a personal standpoint. supervisors who, for years, were responsible for national banks have suddenly been thrust into an international working environment. this is exciting and challenging at the same time, and it will take some time for everyone to adjust to their new surroundings. what we have seen in the first six months has been quite encouraging, though. from an organisational point of view, the bundesbank has already adapted. altogether, we have established three new organisational units. first, we have set up a staff unit to coordinate those colleagues from the bundesbank who work in the jsts. second, we have created a new division to analyse the foreign banks which fall under european banking supervision. third, we have established a secretariat to prepare the meetings of the