therefore more credible and strengthens stability and confidence in the area ; ii ) a unified mechanism for the resolution of banking crises, so that individual countries no longer have to shoulder the burden of major upheavals on their own ; iii ) a unified deposit - guarantee mechanism to avoid banking panics. over the past year, these ideas and words have translated into concrete actions, and europe has demonstrated that it can carry out rapid, in - depth reforms, to ensure it emerges stronger from the crisis. i would just like to tell you where we stand currently in the move towards banking union. as you know, the area in which we have made the most progress is in supervision. european heads of state agreed to the principle of a single supervisory mechanism at the end of 2012, and we are in the process of actively preparing its implementation. by november, the main banks in the euro area will be supervised by a federalized system headed in frankfurt. a supervisory board will be established to plan and carry out the ecb ’ s supervisory tasks, undertake preparatory work, and propose complete draft decisions for adoption by the ecb ’ s governing council. moreover, the entire european banking system, including hungary of course, will be supervised on the basis of a single set of principles – the single rulebook – which has been compiled by the european banking authority. this is a huge step towards a more unified and consistent european banking system, and one that is therefore more robust and efficient. the move towards a single supervisory mechanism is firmly on track. last october, we reached another important milestone with the announcement by the ecb that european banks will be subject to a comprehensive assessment prior to the set up of the ssm in november 2014. bis central bankers ’ speeches this exercise is now underway. we must be aware that the exercise is an unprecedented one : about 130 participating banks – including 13 french banking groups – representing 85 % of the total assets of european banks, will simultaneously undergo a thorough asset quality review ( aqr ) using a common methodology, and this will be followed up with stress tests this summer. the purpose of this rigorous exercise is threefold : • to foster transparency about the condition of the european banking system ; • to take the needed corrective actions ; • and finally to restore confidence. of course, this exercise is a challenge. but i think that it is also a great opportunity for european banks to show that they have cleaned up their balance sheets and that they are trustworthy. as you can

, cutting its key policy rates to historically low levels and providing unlimited 3 - year liquidity. but even this proved insufficient to calm market tensions. in some countries at least, monetary policy measures were simply not being fully transmitted to the real economy. what was the reason behind these three phenomena, which were largely responsible for the escalation of the crisis in the euro area? it was the vicious circle that developed between the state of a country ’ s banking sector and its perceived sovereign credit quality. and why did this vicious circle emerge? because of the lack of banking union : • in a monetary union, capital can circulate freely and rapidly from one country to another, which can amplify the potential fallout from “ banking panics ”, unless there bis central bankers ’ speeches are effective supranational mechanisms in place for supervision, resolution and the guarantee of deposits ; • as long as the financial health of the euro area remains at the mercy of the difficulties encountered by one of its member countries, there is a threat that negative interactions may develop between sovereign credit risk and banking risk ; • in reality, the lack of a banking union allowed a high degree of fragmentation to develop within the euro area banking system and this, in turn, nourished doubts about the “ singleness ” of the euro. the crisis thus made it clear that a uniformly healthy financial system was vital to safeguard the stability of the euro area and ensure the effective transmission of a single monetary policy. once we had agreed on this reasoning, we had to come up with a concrete solution. the key to banking union can be summed up as follows : the aim is to find a way to ensure that banks in the euro area are considered precisely as that, as “ euro area banks ”, and not as “ irish ”, “ german ” or “ italian ” banks. in other words, the goal is to ensure that credit conditions in the euro area will not depend on where you are but on who you are, which is what should be expected of an efficient financial market. to achieve this, we need to have three things in place : i ) federal bank supervision, to guarantee that all institutions are subject to the same rules and same methods of control. a supra - national supervisor is in fact better placed to assess the risks of cross - border activities and therefore to protect and encourage such activities ; it is not subject to national biases that can lead to the temptation of economic introversion. it is