was erected. on that date, the ecb assumed responsibility for supervising the 120 largest banks in the euro area – with the accession of lithuania, the number of supervised banks has risen to 123. these 123 banks account for more than 85 % of the aggregate balance sheet of the euro area ’ s banking sector, making the ecb one of the biggest banking supervisors in the world. the idea of european banking supervision was undoubtedly born out of the crisis. the crisis lent new urgency to something that had already been obvious before : in banking and finance, national borders are far less relevant than in other areas of life. such an integrated financial system is certainly desirable for all the well - known reasons, including efficiency gains and risk - sharing. however, that which distributes gains among all of us in good times, forces us all to share the pain in bad times. in an integrated financial system, problems in one country can quickly spread to others. bis central bankers ’ speeches this is what happened during the recent crisis and it made us realise that banking supervision had to adapt – with international banks that operate across borders, isolated supervision was not so “ splendid ” after all. to quote the imf, the european banking union is the “ logical conclusion of the idea that integrated banking systems require integrated prudential oversight ”. to be sure, there was a certain amount of cooperation in supervisory matters before the crisis. there was an exchange between home and host supervisors of internationally active banks. and there were supervisory colleges in which supervisors of global banks convened and shared their insights. however, this was not enough. an integrated financial system cannot be supervised through cooperation, it requires an integrated approach. taking banking supervision from the national level to the european level has three specific benefits. first, european banking supervision makes it possible for banks in the entire euro area to be supervised to the same, high standards. these standards will emerge from sharing insights and empirical findings internationally and taking the best from each national approach to banking supervision. germany, for instance, could benefit from a more quantitative - oriented approach, which has already been adopted by other countries. second, european banking supervision makes it possible to effectively identify and manage cross - border problems. this is essential, because, as i have mentioned, large banks are usually active in more than one country. the failure of the franco - belgian bank dexia in 2011 is a classic example of a case where banking supervision with a cross - border focus could have improved crisis management. another example is german

experience in banking supervision, has nine regional offices and about 1, 300 supervisors. consequently, the ongoing banking supervision lies with “ joint supervisory teams ”. these teams are headed by ecb staff, but are comprised mainly of national supervisors. the bundesbank is represented in all the joint supervisory teams for german banks and also in some teams for foreign banks. altogether, about 300 supervisors from the bundesbank work in the context of european banking supervision. and here, i am just talking about ongoing supervision. in addition to that, all the national supervisory authorities are represented on the supervisory board, the decision - making body of european banking supervision. for the bundesbank that means we are ceding, in whole or in part, responsibility for supervising 21 german institutions, but becoming involved in the supervision of 102 foreign institutions. you can imagine that all this requires national supervisors to adjust – not only from an organisational point of view but also from a personal standpoint. supervisors who, for years, were responsible for national banks are suddenly being pushed into an international working environment. this is exciting and challenging at the same time, and it will be some time before everyone has adjusted to the new circumstances. experience of the first few weeks is rather encouraging, though. from an organisational perspective, the bundesbank has already adapted. we have changed our structure to allow us to play an efficient and effective role in european banking supervision : we have set up a new secretariat to prepare the meetings of the supervisory board, we have set up a new department to analyse the foreign banks which fall under european banking supervision, and we have set up a staff unit to coordinate those colleagues from the bundesbank who work in the joint supervisory teams. all this requires great effort and represents a formidable challenge. however, the real challenge does not lie in organising day - today supervision in the new system. in my view, the real challenge lies in the decision - making processes. since the ecb is responsible for european banking supervision, the governing council is the highest decision - making body not only for monetary policy issues but also for matters of banking supervision. these two responsibilities converge on the banks. banks are a crucial element in the transmission process of monetary policy, while, at the same time, being the object of banking supervision. this, of course, gives rise to conflicts of interest, as it creates a banking supervisor with access to central bank liquidity. to minimise such conflicts of interest, a governance structure has been