of non - performing loans, low profitability, and it and cyber security. for european supervisors, preserving the “ tough but fair ” character is to a large extent a matter of day - to - day supervisory practice. daniele will surely stress this point when she addresses you later. and there are external events such as brexit which demand our attention. i consider brexit to be manageable for banks, but it requires timely, thorough and comprehensive preparations. and because of the uncertainty it involves, supervisors have their own part to play in ensuring a smooth transition to a post - brexit era. it requires us to be responsive and pragmatic as well. therefore, i strongly welcome the commitment shown by ssm supervisors to cooperation and 1 / 6 bis central bankers'speeches open exchange. there is no need for me to go into detail on these subjects. as i mentioned just now, these are topics i very much imagine daniele will touch upon. instead, i wish to review the set - up of the european single supervisory mechanism and offer some ideas as to how it can be developed further. but for that purpose, i find it helpful to remind ourselves of the organisational principle of the ssm. it was not intended to be a single, hierarchical organisation, but rather a supervisory network. there are still many misperceptions on that matter. without doubt, the ecb has key competences regarding the ssm. the ecb assumes responsibility for the overall functioning of the project. and apart from directly supervising the large, “ significant ” credit institutions, it has also taken over various powers from the national competent authorities, the ncas – one such important power being licensing. but that does not make it a hierarchical undertaking. instead, different modes of cooperation were installed. for example, joint supervisory teams include personnel from ncas that now receive their instructions from the ecb, while inspectors from ncas continue to be directed by their employer. other nca staff again are on secondment at the ecb. the different modes of cooperation also become visible with respect to competences. ncas still have major tasks and competences beyond directly supervising the 3, 200 smaller, “ less significant ” institutions in the euro area. think of the roughly 1, 500 written procedures from last year : every single decision is approved by the supervisory board, which includes members from 19 ncas, thus boosting the transfer of knowledge from ncas to the ecb and ensuring that decisions

who else, if not creditors, would be more suited to pushing governments to take a sustainable financial path? why should we expect states to leave the welltrodden path of least resistance – which is expanding debt instead of committing to painful reforms – when there are no regulatory restrictions such as a non - zero capital requirement for sovereign bonds in place that provide actual incentives to do so? so whatever transitional challenges there may be, they don ’ t make the idea of a more riskadequate treatment of sovereign bonds less of a desirable ultimate aim. also, framing the reform as a mere distribution battle between member states is deceptive. in the long run, everyone stands to benefit from a sustainable order. instead, we need to focus on change management. how do we smooth the transition toward a sustainable financial order? in my view, just as nobody should want a drug addict to die from going “ cold turkey ", we should take into account the challenges facing those who will be worst affected by a change in regulation – and offer demanding, but feasible transition schedules. of course, regulation of sovereign risk is also a global issue. any framework of rules for the financial sector these days needs to be comprehensive and consistent. there is a straightforward and sobering reason for this : you can count on the global financial industry to quickly locate regulatory gaps. the basel committee has put sovereign risk on its agenda for 2017 and 2018. i strongly welcome this step, and call upon all parties to work together to find a good solution. for the euro area, reforming the regulation of sovereign risk will be even more vital. this is because a currency union is particularly vulnerable to national distress in case that market forces break down. a common currency, for example, does not allow currency depreciation as an automated correction mechanism. therefore, achieving reform towards better self - governance in the banking sector, markets and state finance will be an indispensable step towards a more sustainable euro area. 5. conclusion ladies and gentlemen i have listed several organisational challenges which the ssm will need to come to terms with, if it is to live up to its character as a network. 1. national authorities need to honour their staffing commitments, because these are what drives the operational functioning of the ssm. 2. we need to remove boundaries between supervisors in their daily routines with a view to nurturing a “ one - team ” culture. 3. we need to enhance our language skills to account for the cultural diversity that is part and