tonight i ’ ll focus on one of the most important : monetary policy. eight times per year, the federal open market committee – the fomc – meets to set the path of interest rates over the next six to seven weeks. all 12 presidents of the various regional federal reserve banks – including me – and the governors of the federal reserve board participate in these meetings. how does its regional structure help the federal reserve system make better monetary policy? the answer lies in the nature of the regional bank presidents ’ contributions during fomc meetings. during the course of the meetings, the presidents typically comment on the behavior of their district economies – in my case, the economies of the six states that make up the ninth district. this region - specific information helps to provide a granular, more forward - looking foundation for the making of national monetary policy. bis central bankers ’ speeches where do the presidents get this region - specific information? there are many answers to this question. but we are especially indebted to the members of our boards of directors and advisory councils, who use their extensive contacts in the local community to provide us with valuable economic intelligence. the reserve banks know that our district economies are all complex systems, and so we need “ intel ” from a wide range of perspectives. accordingly, the reserve banks work hard to ensure that the members of our boards and advisory councils come from many walks of life – farming, banking, fortune 500 companies, nonprofits, labor unions and start - ups to name but a few – and many parts of our districts. so, the 12 presidents contribute to monetary policy deliberations by providing local economic intelligence about their districts. but the presidents also often make comments about economic research being done within their banks that helps shed light on national economic conditions. hence, the geographic diversity within the system is important for another reason : it generates valuable intellectual diversity across the system. for example, back in the 1970s, the minneapolis fed research department played a key role in fostering the “ rational expectations revolution ” that has helped transform the making of monetary policy around the world. i ’ d love to take a few hours to explain this important development in policymaking – but it ’ s a friday night. the relevant point is this : would these economists have played this same role had they been working in washington, or anywhere else in the system, for that matter? i believe that the answer to this question is no. the ideas in the research department were generated by synergistic

participating countries, and ( ii ) there is still uncertainty regarding the role of these countries within the single supervisory institution. bis central bankers ’ speeches the question arises whether the decision to entrust the ecb with a banking supervision mandate was the appropriate choice. in my opinion, it seems that is the case, although a number of opinions highlighting potential problems should not be ignored. in favour of the ecb are its strong expertise in the financial sector, as well as the synergy that exists between banking supervision, on the one hand, and the lender - of - last - resort function and payment system oversight, on the other hand. as the third pillar of the banking union, the single bank resolution mechanism is deemed to ensure a centralised management of banking crises that provides options for dealing with bank failures in an orderly way, with minimal disruptions to the economy. the principles of the resolution should be set out in a single rulebook and they should address the issues of the cost of bank recovery, the fiscal backstop, and the moral hazard problem that may occur. the cost of banks ’ recovery or resolution should be borne by shareholders and creditors. nevertheless, in the case of systemic crises, an explicit fiscal backstop may be required, on the design of which a political consensus will be difficult to achieve. another challenge to establishing this mechanism relates to the heterogeneous resolution framework at the national level, which calls for significant changes in national insolvency, labour and tax laws. additionally, if the european stability mechanism were enabled to recapitalise banks directly, negative consequences could occur in terms of moral hazard within the single market, as well as unfair competition between participating and non - participating banks in the banking union. however, one should not overlook the fact that the single bank resolution mechanism has the advantage of increasing the speed and credibility in addressing banking crises ( especially cross - border failures ). as regards the single deposit guarantee scheme, the underlying idea is that a larger pool of resources reinforces confidence in the banking system. a caveat is worth mentioning, however : in times of extreme financial stress, the size of potential liabilities may undermine the credibility of the mechanism. even if this pillar is less urgent than the others, steps in this direction have already been taken. specifically, the coverage of the national deposit guarantee schemes has been harmonised at the level of eur 100, 000 / depositor / institution and measures to simplify protected deposit repayments have been adopted in terms