instead, joint liability must be predicated on two basic principles. one is the unity of liability and control. as long as control rests with nation - states, liability must rest there, too. this is important to avoid promoting excessively risky business models that threaten financial stability. moreover, no incentives should be created to build a bloated financial industry in individual countries that is way out of proportion to the size of the real economy. the other principle that must be observed is taking the appropriate steps in the right order. the logical sequence requires, first, further moves towards european control, which in turn necessitate democratic legitimacy and accountability. bis central bankers ’ speeches i am firmly convinced that all concrete proposals must be informed by these considerations and guided by these principles. moreover, many important details remain to be clarified. these remaining uncertainties have perhaps contributed to the intensity of the recent public debate on this topic. in a situation marked by uncertainty it can even happen that one or two economics professors sign both a petition and the corresponding counter - petition. and this does not even have to be a contradiction if the two countervailing positions depart from different assumptions concerning the principles and the details of their implementation. one of the questions regarding a possible pan - european banking supervision regime that still needs to be clarified is the range of countries that will be subject to it : should it cover all eu member - states or only the euro - area countries? given the interlinkages between financial institutions throughout the eu and against the background of the single market, i see merits in integrating all eu member - states in a european supervisory structure. this would strengthen the single market, it would be consistent with the single rule book, and it would help to create a level playing field. taking this logic further, it would make sense in principle for all banks to be supervised by this european authority. in line with the principle of subsidiarity, the european supervisory authority could then delegate the supervision of systemically unimportant banks to national authorities, subject to the proviso that such banks could then be brought back into the fold of european supervision on a case - by - case basis. i believe a europe - wide prudential regime would definitely benefit from the operational involvement of national supervisory agencies. such involvement, in fact, may well be essential. a key issue for central banks is the precise nature of their involvement in european banking supervision. there can be little doubt that they ought to play a role, given their

the driver to take him to his destination. to his amazement, the cabdriver tells him : “ i would love to take you there but cannot, i ’ m afraid ”. “ why not? ”, he asks, flabbergasted. “ there is a local bye - law that says a taxi has to be here at all times. ” “ but a taxi is here. ” “ ah yes, but if i take you home, there would no longer be a taxi waiting here. that would violate the bye - law. ” this is what can happen with statutory minimum requirements. only capital in excess of the minimum requirements is available to truly and independently absorb business risk. in an actual crisis, it is only this capital that can be used to buy the time needed, for instance, to write down impaired assets, adjust portfolios or restructure business units. in an ideal world, of course, such buffers should be built up before systemic events occur. that is the rationale behind capital cushions. they provide a certain breathing space before institutions are forced to unload risky assets and curb their lending. if the buffers are too small, however, the pressure to deleverage during a shock can become overwhelming and cyclical movements may be amplified. this is where public capital assistance comes into play. in theory, it provides a counterweight and reduces deleveraging pressure. getting the basics right : aspects of a european system of banking supervision the reality can be much rougher, however, for a euro - area country that is struggling to cope with the close interlinkages between the sovereign debt crisis and the banking crisis. the stability of the banking sector is then called into question because the country is no longer regarded as being fully capable of resolving its banking crisis unassisted. for such cases, the efsf has clear rules according to which other euro - area countries can step in to help that country. the affected country remains the partner for the donor countries ’ assistance. by providing such assistance, the donor countries are already taking on considerable risks. extending this risk - sharing role, as is being proposed in connection with a banking union – in the form, for example, of a european restructuring fund or a european deposit insurance scheme – would necessitate far more extensive intervention in countries ’ national sovereignty and in their fiscal and economic policies. i hope you will agree with me that joint liability must not be allowed to be introduced covertly through the back door.