. a key element of this project is legislative in focus. we need to ensure that we identify the necessary legislative change that will need to be made at a domestic level to facilitate the coming into force of the ssm. the ssm regulation sets out the division of competences between the ecb and the national competent authorities. of course this regulation is directly effective. nevertheless amendments may need to be made to our domestic financial services legislation here in ireland. these amendments may be required to ensure that the irish legislative framework accommodates and facilitates the new structure of prudential supervision. more importantly we need to ensure that our legislation does not conflict with any requirements or provisions of the ssm regulation. for instance, given that the ecb will be the decision - maker with respect to applications for authorisations for new credit institutions, the domestic legislative provisions may require amendment to reflect the role of the ecb in this regard. the central bank will retain the role of performing an initial assessment of an application in this instance. bis central bankers ’ speeches to offer another example, in the case of a notification of acquisition of qualifying holdings, the central bank will perform the initial assessment of the acquisition but the decision to oppose such acquisitions will ultimately rest with the ecb. as such, we need to review our domestic legislative framework here in ireland to assess how best to accommodate this new division of competence. enforcement with regard to our enforcement powers, it is becoming increasingly clear to us that the enforcement role of the central bank will change. under the ssm, both the ecb and the central bank will have the power to impose administrative penalties on credit institutions. how will this work in practice? i will share with you our current understanding, while recognising that the set - up is yet to be finalised. if there is an infringement of the capital requirements regulation ( crr ), the ecb will have the power to impose administrative pecuniary penalties upon a significant credit institution. the central bank of ireland may impose administrative pecuniary penalties on less significant credit institutions. the ecb will be able to impose administrative pecuniary penalties of up to twice the amount of the profits gained or losses avoided because of the breach or up to 10 per cent of the amount of the total annual turnover in the preceding business year. the ecb will also have a sanctioning role in relation to both significant and less significant credit institutions where there is a failure to comply with obligations under ecb

adverse scenario. where capital deficiencies are observed, remedial plans will be required. at its heart, the stress test is a constrained bottom - up forecast conducted by the banks themselves. the central bank, as the competent authority, will challenge the results produced by the banks for conservatism, consistency and quality. we have also now bis central bankers ’ speeches developed models to challenge the results of the banks in this area. this will increase the credibility and robustness of the exercise and results for these banks. both the banking and insurance industry should be aware of the processes and requirements expected in these exercises. in particular, data collection and data quality are an integral part of the input into stress testing models. competitive advantage can be obtained by those banks that have invested in the correct infrastructure for data recording and the correct personnel for using this data for risk assessment. it is important that such an investment is made by all financial institutions and our significant credit institutions in particular, in data collection and storage infrastructures so that we can ensure that all risks can be tracked. this will ensure that we implement best practice supervision in line with and possibly even ahead of other eu member states. risk assessment finally, the third element of the comprehensive assessment is the supervisory risk assessment. the supervisors at competent authorities are continuously assessing risk. indeed many of you will be aware that our supervisors regularly assess the risk profile of your banks. in doing so the supervisory risk assessment aims to continually address key risks in the banks ’ balance sheets, including liquidity, leverage and funding. at the moment, the ecb and the national competent authorities are jointly developing a new risk assessment system that will be deployed as a key supervisory tool in the ssm. the competent authorities continue to be legally required to conduct risk assessments however. the idea is that this methodology will only be partially used to allow comparability of results and to ensure a smooth transition. this risk assessment can have the effect of increasing capital requirements where banks have underestimated pillar 1 risks or where pillar 2 risks exist. of course, the aqr and stress tests themselves provide explicit and extremely valuable supervisory risk assessment information. they will be central to any determinations made by the central bank in the context of the risk assessment. preparatory work outside of the comprehensive assessment in order to prepare fully for the advent of ssm on 4 november, a considerable amount of other work distinct from the comprehensive assessment is also underway. i referred earlier to the project we have established in this regard