national supervisory authorities will act as agents of the ecb in the supervision of smaller banks. the creation of the single supervisory mechanism is well under way and it will start operations in november this year. the transition to the banking union will be preceded by a review, the so - called “ comprehensive assessment ” of the euro area banking system in order to ensure that banks which come under the ecb supervision are adequately capitalized. the second component is the new bank recovery and resolution framework. it will give the authorities early intervention powers which make it possible to take decisive action in problem banks before the banks ’ own funds are exhausted. the framework will also give authorities new bail - in powers which should ensure that the taxpayer is only the last in line to recapitalize banks and normally not needed at all. in addition to the new harmonized rules on bank resolution, europe also needs a unified resolution authority, called the single resolution mechanism, with access to a resolution fund. the design of these institutions is under intensive negotiation. most likely they will start bis central bankers ’ speeches as an intergovernmental structure but the eu community elements will be reinforced over time. the third component of the banking union, in addition to single supervision and single resolution mechanisms, will be the harmonization of deposit insurance systems. i should mention yet another reform in the area of banking, regarding the structure of banks and the regulation of proprietary trading. a month ago, the european commission presented a legislative proposal which, if enacted, will give the authorities powers and under some conditions also an obligation to require of banking groups the separation of the riskiest trading activities from deposit banks. in the euro area, the competent authority will be the ecb. this proposal for structural regulation follows, at least partly, the recommendations of the eu expert group which i chaired and which submitted its report about a year and a half ago. the commission ’ s legislative proposal would also include an outright prohibition of proprietary trading, resembling the u. s. volcker rule. * * * the institutional developments which i have reviewed were not mainly directed towards managing the recent crisis, which fortunately seems to be gradually abating in europe. they are meant to prevent future crises, to avoid the repetition of the painful experiences of the last five years. but the reforms have served a purpose also in the present situation. they have contributed to the restoration of confidence in the financial markets so that tensions in the bond market, which peaked in 2011 and 2012, have reduced and the interest

for his cabinet to discuss. to his surprise, the british government received the proposal enthusiastically and approved it on 16 june 1940. the plan was also supported by the french prime minister reynaud, who was unable to convince his cabinet and resigned. petain came into power. france was lost. the second episode relates to the year 1950. we are here in the middle of the massachusetts winter. winter sports seem to unite many of us, here in boston and in finland. we have even a same asset in ice hockey, the goalkeeper tuukka rask, of the boston bruins and of the national team of finland. winter and skiing meant a lot for jean monnet, too. monnet wrote his great proposal of the european coal and steel union during a two - week cross country skiing holiday on the alps in the winter of 1950. he made his skiing trip alone, with only a guide helping him to find his way. european integration can only be understood against its historical background and especially the two world wars. the community was founded on the necessity of ending the historical antagonisms between the great european powers. bis central bankers ’ speeches jean monnet stressed that there could be no peace in europe, if states continued to be structured around the sort of national sovereignty that leads to politics of privilege and economic protectionism. this thinking was certainly shared by many other european politicians. one of them was j. k. paasikivi, the finnish banker and diplomat, and later the president of finland. in the summer of 1944, mr. paasikivi wrote in his diary about the fate of small countries. his reading of history had made him a pessimist : “ states act according to the raison d ’ etat, only in the national interest. it is frightening, blood - red. ” he went on : “ solving the problem of limiting the raison d ’ etat and its relationship to morality is an issue that, although primarily affecting the future of small countries, will ultimately also determine the future of larger countries and the whole of mankind. ” this rather grim background goes a long way in explaining the european approach to integration. the emphasis has been on agreeing on common rules building eu law. the member states have been willing to commit to joint rules which protect members from negative externalities of each other ’ s policy actions. but they have been cautious in delegating executive power to the eu institutions. this is evidenced, for example, by the fact that the eu budget