sabine lautenschlager : harmonisation paves the way for a european banking market statement by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the single supervisory mechanism, at the federal financial supervisory authority 15th anniversary event, bonn, 28 june 2017. * * * there are two questions on the future of european regulation that we have to answer. first, will regulation continue to be shaped by global standards? second, how “ european ” must regulation in europe be? regarding the first question, i am still a firm supporter of global regulation. the financial crisis of 2008 showed us the interconnections of the global banking system. if a bank fails, it can destabilise markets worldwide and nationally. the stability of the system can only be ensured by global rules, and that ’ s exactly what the basel committee is working on. so once the committee has concluded its work on basel iii this year, all the major financial markets should implement the new standards – in europe and elsewhere. and in that context i find the most recent proposals by the us department of the treasury worrying. it looks as if elements of the global reform might be postponed or not even implemented. this involves important areas such as the new rules on the trading book. in my view, purely national initiatives will not improve the stability of the financial system, quite the opposite. it is all the more important that the eu implements the basel standards. the rules should be harmonised as far as possible for europe ’ s banking market. and this brings us to the second question : how “ european ” must regulation in europe be? the single market is a key element of a united europe, and we also need a single european market for banks. this involves harmonising the rules for banks – wherever it makes sense. but we should not forget that the european banking sector is characterised by diversity, not least as a result of national specificities, because this diversity contributes to the stability of the financial system. what we need, then, is a balance between harmonisation and diversity. there are some areas that require greater harmonisation and other areas that require less. for example, small banks in the euro area need somewhat less harmonisation. taken in isolation, a small bank poses a limited risk to the financial system. it only becomes problematic if many small banks run into trouble at the same time, and for this eventuality we need sound institutional protection schemes

the power of technology, reduced its cost, and made possible a revolution in production and business processes. the skills and knowledge of the united states workforce played a critical role in contributing to the extent and spread of innovation. the u. s. economy became substantially more open, with trade increasing substantially as a share of gdp. deregulation in the 1980s ( telecom, transportation, finance ) and since then have helped make the u. s. economy more dynamic and flexible. the u. s. financial system became stronger, more resilient, better at matching capital to ideas, and better at spreading and managing risk. and finally, u. s. macroeconomic policy was very supportive. good fiscal policy choices in the 1990s helped produce significant surpluses, freeing private savings for private investment. the gains in price stability delivered by the fed under two chairmen provided a critical foundation for the sustained increase in private investment that helped translate a shift in the technological frontier into accelerating productivity. these forces reinforced each other. none would have been as powerful without the impact of the others. globalization, deregulation and changes in the financial structure all worked together to produce a more competitive business environment, motivating major improvements in investment and in efficiency. good monetary policy and fiscal policy provided a supportive environment, with higher public savings and low inflation. luck seems to have played some role, too. the strategic environment seemed in some ways more stable and secure. the size and frequency of external shocks that hit the united states and the world economy during this period were in some ways less acute and easier to manage. are these improvements in underlying or structural productivity growth sustainable? this is a hard question to answer. history doesn ’ t seem to offer much of a guide, though we ’ ve seen other periods of sustained productivity booms. we did not anticipate this acceleration, which itself suggests we need to be somewhat tentative in forecasting its future. dale jorgenson, mun ho, and kevin stiroh have concluded in some recent research that there ’ s a reasonable prospect that structural productivity growth will average just over 2. 5 percent a year for the next decade. and they think the probability of growth exceeding that pretty favorable forecast is higher than the odds we ’ ll be disappointed. in support of that view, they make essentially two points. first, they do not see evidence of deceleration in the pace of advancement in technological innovation ; nor do they see signs of diminishing marginal returns to it investment or