longer being questioned. supervisory teams from different countries see the banks with fresh eyes and on the basis of their common experience. this creates the necessary critical distance for sensible supervision. • banking supervision in europe should take tough but fair action ( the emphasis being on “ action ” ). european supervision, the ssm, sees itself as a supervisor which identifies and addresses risks at an early stage, and thus contributes to ensuring that the banking system is able to function properly. a light touch and reactive supervision should belong to the past. • european supervision should create a level playing field. that is why the first thing that we developed in the ssm was a consistent supervisory approach with a consistent methodology for assessing banks ’ risks and governance structures, as well as their equity capital and liquidity positions. • for the supervision of systemically relevant and large, internationally active banks in particular, the ssm represents a quantum leap forward. the ssm allows us to compare and adapt supervision across 19 countries, to identify best practices and to ensure that they are implemented consistently through effective quality assurance. there are now completely new possibilities for comparative and cross - sectoral analysis than were available at the national level. for our tasks, we can use information and insights from banks with very different business models. this enables us to identify risks and undesirable developments more clearly and at an earlier stage, and to take suitable countermeasures. we can also put work on banks ’ internal models, which have a significant influence on a bank ’ s capital requirements, on a new footing. we will use the opportunity, given the improved level of data and insight, to implement strict rules for the approval and ongoing supervision of internal models. despite this progress, there is still a lot to do in the further development of supervision. the effectiveness and efficiency of supervision is dependent on the legal framework it applies, although this is not the sole determinant. soft european standards or diverging national rules impair the ssm ’ s ability to take action and its effectiveness. and this does not just concern bis central bankers ’ speeches national rules that affect the quality of banks ’ equity. the ssm applies 19 different national legal frameworks and not only when, for example, we examine the professional suitability of managers in large, internationally active banks. detailed rules on governance in banks and deliberations on transposing extensive rules on banks ’ internal control systems into national law complicate or even prevent the desired level playing field of consistent supervision

– they increase fragmentation. moreover, european supervisory legislation provides more than 150 options to choose from, options which have so far been exercised along highly different lines at the national level. some are justified by local features – in this respect, the principle is that similar things should be treated similarly and dissimilar things should be treated dissimilarly. many of the options are based rather more on tradition, and are in conflict with the principle of “ same business, same risk, same rules ”. the smaller proportion of these options remains national in character. competence for the majority of the options – for over 100 – has been vested in the ssm since 4 november 2014. the ecb, together with the national supervisory authorities, has now begun to arrange for their consistent application. this process and the resulting adaptations will not always be simple or convenient, but the benefits of the outcome should outweigh the cost of adaption – not just in terms of financial stability, but also through more balanced competition and lower transaction costs. in some respects, we are still at the beginning of the road, but i am confident that the ssm has put us are on the right path towards achieving these objectives. 5. conclusions i don ’ t think that you were much surprised by my saying that i don ’ t think much of lax regulation. given the obvious tendency towards exaggeration and erroneous developments in financial markets, and the potential damage for the economy and society, good regulations are an indispensable prerequisite for ensuring that the financial sector is able to function properly in the long term. this does not mean that the consequences of regulation and supervision for the banking industry ’ s ability to function should not be considered. the desire of some to make up for the rigour of the rules with less stringent supervision is something i reject. that would be the wrong approach. but what are required are not only good regulations, but also a well - functioning supervisor that exercises tough but fair control to help ensure a stable banking system and a level cross - border playing field. a decisive factor for the success of the ssm will not just rest on banks in the euro area being subject to a consistent supervisory approach. rather, both supervisory legislation and the powers of european supervision must take further steps in the direction of harmonisation. finally, it is not possible for every conceivable situation to be covered by regulations, nor can every crisis be anticipated from a supervisory point of view. although