have to be prepared for failure scenarios and guarantee smooth resolution. importantly, resolution and solvency policies are not aimed at identical issues. in fact, crisis management maintains financial stability in a different way, namely by making sure that bank difficulties do not negatively impact private savings or market discipline, something which cannot be achieved effectively through solvency regulation. there are several ways to read the most extensive institutional reform in europe recently, the so - called banking union. clearly, the euro zone faced serious distress, and our institutional framework had not proven credible nor effective – market reactions showed this quite unmistakably. through the lenses of evolutionary adjustments, the move towards the banking union was a patch to our historical supervisory system, because it, too, had shown to be a living organism that had reacted in an undesireable way to the financial crisis. the most developed part of this banking union is the single supervisory mechanism, which has rearranged the supervision of 129 of the largest and most significant institutions in the euro area, thus improving supervision in a number of ways. given the fact that even supervisors are prone to error or even bias, the mechanism builds upon international teams under the auspices of the ecb, with the favourable effect that national interests are dampened. on top of this, supervisors ’ hands are tied to a greater degree as the setup makes it easier to compare supervisory measures and results. last but not least, all supervisory and organisational decisions have to be approved by a common board, so that all national competent authorities have their say in the joint architecture. in everyday - life, the vast amount of decisions consume quite a lot of resources in national authorities. but from a financial stability point of view those institutional frictions and even opposed interests are manageable inasmuch as institutional rivalry may enhance checks and balances. in sum, the single supervisory mechanism has changed supervisory incentives. it remains to be seen whether another pillar of the banking union, the single resolution mechanism, will improve effective resolution in a similar fashion. 4. conclusion ladies and gentlemen, i began this speech by posing the question : will the post - crisis regulatory and supervisory regime a project be finished soon? my response to this question is that while the basel iii reforms are set to be finalised by the end of the year and while there are no further reform plans in the policy pipeline, i feel we should frame the overall question a little differently. in my view, the supervisory and regulatory changes witnessed in europe and in many other parts

as well? how are we to interpret our regulatory and supervisory regime against this background? development in basel in the recent past should be viewed as part of a bottom - up evolution of the financial stability regime. in spite of the inclusion of a huge mass of statistical data in the calibration of capital requirements, the final results will remain hypothetical and a political compromise. safeguarding solvency and liquidity is just one of a number of strategies aimed at creating a robust financial framework. another core element of post - crisis regulation was to make rules coherent, internationally consistent and to avoid bypass. let us not forget that financial actors and entities, as living organisms, will eventually discover and make use of any available loophole. if there is any way to evade short - term pain, an industry worth trillions of euros will always look for it. when i say this i am not expressing criticism, i am simply stating the facts. bypassing the rules is a key reason why regulation has become even more complex. but there have been more lessons learned. one important realisation has been that a robust banking sector requires more than one line of regulatory and supervisory defence. it is true that solvent banks are central to financial regulation and supervision. however, in place of one single “ perfect ” line of defence, where success depends one hundred percent on these legal ideas and supervisory processes, we now rely more heavily on multiple lines of defence. taking solvency and liquidity as a starting point, supervisors have intensified their efforts to target the root causes of the problems. capital buffers were introduced which bis central bankers ’ speeches increase banks ’ room for manoeuvre in a downturn. stress tests examine how robust a bank ’ s capital is in terms of adverse economic projections in the future. what is more, eurozone supervisors are paying greater attention to business models as today ’ s strategy feeds future risk capacity. supervisors have even sharpened their focus on the culture and behaviour of bank officials. there is in fact a link between the behavioural inclinations of these officials and actual solvency : all of the steps taken are geared to minimising the likelihood of deterioration and failure at the earliest possible stage. but solvency is not the only pillar of a stable financial sector. the european resolution framework has complemented solvency requirements. for even in cases where all previous efforts to keep a bank alive and healthy prove unsuccessful, the financial system should not be prone to panic reactions and contagion effects. banks and responsible authorities