##s. evidently, the exercise aims to strengthen confidence in the european financial system through transparency and reinforcing the solvency of those banks that need it. nonetheless, the spanish experience, in particular that from the exercises performed in 2012 under the financial assistance programme, shows that the proper metric for measuring attainable credibility is not based on the estimated capital needs resulting from the exercise, but on the application of a sufficiently rigorous methodology enabling all potentially vulnerable segments of the european banking system to be evaluated consistently, particularly those whose reflection in the financial information published is of greater complexity. it is moreover important that, as announced in the public communique released, the measurements of capital made should be consistent with the regulatory framework in force which, in europe, essentially comprises the recently enacted community directive and regulation on capital requirements. bis central bankers ’ speeches thanks to the reform undertaken and the measures applied by banks, the spanish banking system is, generally, in a reasonable position to face these exercises. however, obtaining a positive result in the exercise is only a favourable starting point for assuming the new supervisory regime in a macroeconomic and financial framework which, despite the recent improvement, remains beset by challenges to banks. accordingly, irrespective of the results of the exercise, banks should continue to focus on implementing measures geared to capital preservation, improved efficiency and the pursuit of rigour in the recording and monitoring of asset quality. single resolution mechanism and fund the second essential element of banking union is a single resolution mechanism. it has been said on numerous occasions that unified supervision will not suffice to eliminate market fragmentation. another prerequisite is that similar banking liabilities of banks based in different jurisdictions must receive similar treatment in the event of solvency problems. in order words, the resolution of vulnerable banks has to proceed according to common rules applied on a centralised basis by a single authority. regarding regulations, the agreement reached to approve the future bank recovery and resolution directive is a notable step forward because it offers a common framework for orderly bank resolution at a minimum cost to taxpayers. the directive introduces burden - sharing or bail - in arrangements establishing a minimum amount and clear order of cost assumption by shareholders and creditors. it thus makes for accurate perception of the risk associated with each liability instrument and minimises the bill to be footed by taxpayers for the disorderly winding - up of banks. also envisaged is a resolution fund fed by contributions from the industry to meet any needs for capital which cannot be covered by burden - sharing

exercises. furthermore, last december the council of the european union reached an important consensus after several months of complex negotiations, which, taken together with the aforementioned directive, amounts in practice to the creation of a single resolution mechanism. further to this consensus, a bank resolution board will be set up whose scope of action will be the same as that of the single supervisory mechanism. it will have considerable freedom to act urgently in cases of restructuring or winding - up. it was also decided to set up a single resolution fund which will be progressively endowed with financial resources. the bank resolution board will be entrusted with applying resolution rules uniformly, approving restructuring and resolution plans for banks supervised directly by the ecb and determining how the resolution fund is to be used. the details of the single resolution fund are to be set forth in an intergovernmental agreement of the participating countries before march. however, the consensus reached stipulates that the fund will be financed through contributions from the european financial services industry, although the resources contributed by the banks in each jurisdiction will not be fully merged until ten years have passed. during these ten years the fund will have separate compartments funded by contributions from the banks of each country, which will be progressively mutualised year by year. under this process, the system of burden - sharing among the national and mutualised funds will be gradually adjusted until the national compartments disappear completely around january 2025. the complex agreement reached has yet to be accepted by the european parliament, so there is still uncertainty as to the final design of the mechanism. moreover, the capabilities of the mechanism will foreseeably be limited at first, since the single resolution fund is constrained by its modest size and reduced mutualisation. furthermore, for the time being, the agreement does not include common public mechanisms for the resolution of vulnerable banks after the available private funds have all been used up. bis central bankers ’ speeches in this respect, although the new resolution rules reduce the foreseeable scope of the required external funds, provision should be made for public financial support at eu level to ensure the orderly resolution of systemic banks if necessary. for example, following the example of the us, we could consider an arrangement in which the european stability mechanism could provide the resources needed to the common resolution fund with a charge to future contributions from the industry. otherwise, the single resolution mechanism would, at least in the short - to - medium term, foreseeably be insufficient to prevent banking crises from continuing to be resolved with a charge to national funds