financial stability can be national or even sub - national, and hence affected by the failure of a local bank. we were talking about the alternative resolution - liquidation, but the criticism may be extended to the no - bail - out principle underlying both. the international monetary fund has suggested a ‘ financial stability exemption ’, whereby it is explicitly recognized that the srm is meant to deal with idiosyncratic events and that the existing arrangements could not solve system - wide crises. 9 imf ( 2018 ). prudential supervision has been micro for decades, if not centuries. the macro - prudential perspective is relatively new and still little understood and not widely adopted around the world. we all know that there can be a tradeoff between micro and macro policy objectives in the financial system. 10 for instance, if we want to protect macro financial stability, we may contemplate bailing out a bank with taxpayers ’ money, but if we want to avoid any moral hazard at the micro level, we have to rule out as far as possible the involvement of taxpayers in rescuing banks. a balance must be found between these conflicting objectives. 5. conclusions let me conclude. in an incredibly short timeframe a comprehensive framework for banking supervision and crisis management in the euro area has been designed and put in place ; thousands of experts are working together to achieve common goals ; methodologies, tools and resources have been pooled in order to benefit from the best national practices ; cooperation between the centralized hubs ( in frankfurt and brussels ) and the national authorities has been fruitful, even in the case of disagreement. last but not least, banks in the euro area are now stronger than 10 years ago. this positive experience shows that the challenges ahead can be successfully addressed in a pragmatic way. banking supervision needs to be constructive, not destructive. this is always true, but in the euro area today it needs to be constantly remembered. prudential rules and practices should be strict but proportionate, and they should always keep the playing field level. we should also take into account the competitive conditions between our banks and banks outside the euro area. we live in times of rapid change in the way financial business is conducted around the world. the application of technology to banks and other financial companies is revolutionizing the market. 11 supervisors need to look forward as visco ( 2018a ). cgfs ( 2018 ), panetta ( 2018 ), visco ( 2018b ). much as they can.

. since the production and distribution of goods and services are essentially driven by state orders and rationing, finance amounts to little more than a system for record keeping. while there are pro - forma payment transfers among state - owned enterprises, few if any actions are driven by them. payment arrears, or even defaults, are largely irrelevant in the sense that they are essentially intra - company transactions among enterprises owned by the same entity, that is, the state. under central planning there are no credit standards, no interest rate risks, no market value changes - - none of the key financial signals that determine in a market economy who gets credit and who does not, and hence who produces what and sells to whom. in short, none of the financial infrastructure that converts the changing valuations of consumers and shifting efficiencies of capital equipment into market signals that direct production for profit is available. but it didn ’ t matter in the soviet - bloc economies. few decisions in those centrally planned systems were affected by the lack of a developed financial system. regrettably, until the berlin wall was breached in 1989, and the need to develop market economies out of the rubble of eastern europe ’ s central planning regime became apparent, little contemporary thought had been given to the institutional infrastructure required of markets. in the west, that infrastructure had developed pragmatically, interacting with, and facilitating the evolution of, the markets themselves. in the years immediately following the fall of the berlin wall, many of the states of the former soviet bloc did get something akin to a market system in the form of a rapid growth of black markets that replicated some of what seemingly goes on in a market economy. but only in part. black markets, by definition, are not supported by the rule of law. there are no rights to own and dispose of property protected by the enforcement power of the state. there are no laws of contract or bankruptcy, or judicial review and determination again enforced by the state. the essential infrastructure of a market economy is missing. black markets offer few of the benefits of legally sanctioned trade. to know that the state will protect one ’ s rights to property will encourage the taking of risks that create wealth and foster growth. few will risk their capital, however, if there is little assurance that the rewards of risk are secure from the arbitrary actions of government, or street mobs. indeed, the presumption of property ownership and the legality of its transfer must be deeply embedded in the