resolution authority and integrated deposit insurance framework that is both credible and consistent with good incentives are likely to be required, as well. the task at hand will likely require each country to give up a small amount of sovereignty with respect to banking oversight so that the outcome is viewed as fully credible. in my view, this is a critical next step in the “ one money, one market ” project underlying the eu agenda. i ’ d now like to introduce ambassador vale de almeida as our next speaker. the ambassador has been here in his current role since august 2010. prior to his current appointment, he worked as a director general at the european commission ( ec ) and has had a long and distinguished career at the ec dating back to 1982. so he is extraordinarily well - versed to speak on the issues of interdependence and the policy challenges we face. welcome ambassador vale de almeida. bis central bankers ’ speeches

difficult for senior management to properly control a firm ’ s activities and monitor the conduct and behavior of its employees. for these reasons, we need strong internal and external checks on banks — an area to which i will now turn. the complementary roles of regulation, supervision, and culture as i said earlier, a sound financial system is one that is safe and resilient, can support the 3 / 8 bis central bankers'speeches provision of financial services at a reasonable price to the real economy in good times and in bad, and promotes confidence and trust among its customers and counterparties. financial institutions should be prudently managed and subject to strong internal checks — including risk management policies and procedures, internal controls, compliance, and audit. meanwhile, an effective financial regulatory and supervisory regime should be as efficient, transparent, and simple as possible. i think these goals are broadly shared by supervisors and banks alike, which suggests to me that the relationship between supervisors and banks does not always need to be adversarial. indeed, a healthy dialogue helps this supervisory process to work well. for example, it is important that firms are proactive in revealing problems to their supervisors. and, individual institutions can certainly benefit from the horizontal perspective that supervisors bring to examinations. this perspective can highlight where the firm stands vis - a - vis best practices, or where there may be important vulnerabilities in its operations. of course, there is an irreducible amount of tension built into this relationship, given that each party ’ s roles, interests, and responsibilities will not always coincide. banks are naturally more sensitive to constraints on their profit opportunities or dividend policies and to the costs of regulation. they may also question how much protection is necessary — for example, how stringent the capital requirements or how severe stress testing assumptions should be. these are areas where i would expect perspectives to differ. supervisors are principally focused on compliance with laws and regulations as well as issues of safety and soundness. they also bring to their work a perspective on financial stability that may not match the more narrow interests of the firm. for example, supervisors seek to address the externalities created by the failure of a systemically important firm by imposing higher capital and other requirements than the firm would likely select if left to its own devices. the financial crisis is a vivid reminder that there can be many risks to financial stability, and of the need for strong internal and external constraints on banks. here, the “ three pillars ” of regulation, supervision,