european banking system, we move a big step forward. although such a banking system is a necessary condition for sustainable credit growth, it is not the only condition for banks to increase lending to the real economy. at the national level, structural reforms are required that will help firms to regain competitiveness and become sound enough for banks to lend to them. banks take credit risk when lending to the real economy. they need to be convinced that their customers, such as small and medium - sized enterprises, will make enough profits to repay the loans they receive. the growth prospects for national gdp as well as economic and structural factors such as labour market rules and sound fiscal budgets are therefore relevant criteria for banks ’ decision to do business. the ecb will, from now on, have two missions : steering monetary policy and supervising banks. how will a conflict of interests be avoided? monetary and banking supervisory policies can have the same or contradicting objectives. both policy areas, for example, have a strong interest in a sound banking system. nevertheless, there may be future conflicts of interest, and in order to deal correctly with potential conflicts, we strictly follow the separation principle. decision - making related to monetary policy is kept strictly separated from decision - making related to our supervisory tasks, right up to the level of the governing council, which will have the decision - making power in both areas. additionally, the governing council will only be able to object to a draft decision proposed by the supervisory board. this new board is the one steering and influencing supervisory policies and decisions. bis central bankers ’ speeches supervision is starting, whereas the second pillar of the banking union, namely the rules applicable in case of risk of bank failure, is not yet ready. is this not dangerous for the ecb? the single resolution mechanism will be a major step forward in managing the restructuring or resolution of a distressed institution at the european level. and it is true that it will be operational only from january 2016 onwards. but this will not pose a great risk to the ecb as transitional procedures are in place. as of january 2015, all member states need to have a national resolution authority : they will be our counterparts if a bank finds itself in difficulty. similarly, the “ bail - in ” rules will already be partly applied as of january 2015. these rules establish that it will be the shareholders and investors who will bear, in the first instance, the losses of a bank. in 2016 additional rules will come into force, protecting member states and taxpayers

from having to pay for systemically relevant banks by establishing a resolution fund paid for by banks. it will take eight years for the fund to reach its target level of 55 billion euro. is this not too little, too late? it will be a quite significant amount, taking into account several other safety buffers. first, banks have considerably increased their own funds in recent years. second, the resolution fund will only be used after contributions have been made from shareholders and creditors. these could reach up to 8 % of liabilities, which is already a significant amount. thus the overall loss - absorbing capacity of banks has increased considerably. the resolution fund comes on top of this. the third pillar of banking union, the creation of a european fund to guarantee savings deposits, has come to a standstill. should we be worried? not unduly, because deposits are already guaranteed up to 100, 000 euro at the national level. but more importantly : if the first two pillars of the banking union work properly and secure the stability of individual banks and the banking system, the need for a joint fund significantly diminishes. the stress tests revealed worrying weaknesses in italian banks. is italy the weak link in the euro area? as supervisors we do not think in terms of countries, but of banks ’ business and risk profiles. each bank operates differently and therefore has to face different problems ; it would be unwise not to see them individually. bis central bankers ’ speeches