both sides will benefit from each other ’ s know - how. prior to the finalisation of the detailed rules of this supervisory model, a public consultation will be held this autumn. • fourth, a comprehensive assessment of the banks that will be directly supervised by the ecb. as this comprehensive assessment – which will involve a risk assessment, balance sheet assessment and a stress test – is currently attracting most attention, i would like to deal with it in more detail. for it makes clear that the banking union can only be a success if we take the correct approach from the out - set. for various reasons, two stress tests have not led to a restoration of confidence in the european banking sector. this will be our third and last chance. before launching the single supervisory mechanism, we should know the state of the banks that we will be supervising. we want to be free of old liabilities when we take on our new task. but it is also beneficial for the supervised banks themselves for us to have a clear picture of the health of each individual institution. bis central bankers ’ speeches by performing the comprehensive assessment we will provide transparency for investors – and that is exactly what is required to sustainably reinforce confidence in the banking sector. the average price / book ratio for large and complex banking groups in the euro area is currently just over 0. 5. this reflects the opinion of investors that banks overestimate the value of their assets, will not deliver the expected rate of return or will require fresh capital. moreover, confidence in the banking sector is much lower in some euro area countries than in others. that also causes fragmentation in the single market, as reflected in the difficulties some banks face in obtaining market funding. the results of our “ inventory ” are then incorporated in a stress test, which the european banking authority ( eba ) will perform in close cooperation with us. our staff members are now elaborating the methodical details of the comprehensive assessment. the final decisions will be made as soon as the legislation comes into effect and the decision - making supervisory board is in place. to enable the supervisory board to start operating promptly, the chair and vice - chair should be appointed as soon as possible after the final adoption of the legislation. we should now consider how to deal with any weak spots that are revealed during the assessment. funding for any capital shortfalls should preferably come from the market. but we also need a backstop in the event that some banks fail to raise the necessary capital. this is

. let me start with banking supervision. the single supervisory mechanism – where do we stand? if, as i said, the european parliament approves the legislative proposal for a single supervisory mechanism next week, we can begin exercising this single supervision in autumn 2014. bis central bankers ’ speeches we will thereby create a level playing field for all banks in the euro area, because the same standards will apply overall. for cross - border banks especially, it will be simpler when they need only adhere to one framework. and banking groups operating in several euro area countries will immediately enjoy more scope in their liquidity management. european supervision also means that banks will no longer be obliged to hold national assets against national liabilities. particularly in the years of the financial market crisis, this nationally oriented supervision contributed to the increasing renationalisation of the financial markets. our aim, however, is exactly the opposite. it may sound very straightforward. but we still need to resolve some highly practical issues. for example, where can we quickly find suitable staff for the single supervisory mechanism? or who will bear the costs if we come across problems when carrying out the planned balance sheet assessment. some questions can only be answered once the legislative process has been finalised. but our preparations are already advancing at full steam. as soon as the legislation is in place, we will start to recruit experts and managers for the single supervisory mechanism, which i assume will number no less than 1, 000 employees. some 700 of those employees will be directly entrusted with banking supervision. at present, close on 80 staff members of national supervisory authorities are helping us for the transition period. they have been specially seconded to the ecb for this purpose. our internal preparations are concentrated on four main areas : • first, the construction of a database with information on all euro area banks. with the help of this comprehensive overview of the banking system, we will then decide which banks will be directly supervised by the ecb. our current estimate is that around 130 banks and banking groups will come under direct supervision. these banks cover around 85 % of euro area bank assets. • second, the reporting to the single supervisory mechanism. in order to harmonise the data collection we have drawn up extensive guidelines, which are now being tested in a pilot study. • third, a uniform supervisory model, which will lay down how the different layers – national and european – will work together. we aim to form a team of national and european supervisors for each banking group we supervise so that