e. they will help to avoid the build - up of economic imbalances and financial vulnerabilities that have led to the present crisis. setting out a strong commitment and a clear framework for improved future governance also facilitates crisis resolution and crisis management. at the same time we should not put the cart before the horse in the transition period and responsibilities must be clearly defined. this applies in particular to the main elements needed for a banking union. a single supervisory mechanism ( ssm ) ensures effective supervision and a level playing field across the euro area, underpinning financial integration and safeguarding financial stability. the ssm regulation is nearing adoption subject to the necessary parliamentary approvals in a number of jurisdictions. a single resolution mechanism ( srm ) is essential to break the link between banks and their respective sovereigns and to ensure that non - viable banks can be wound down in an orderly manner. a draft regulation for the srm is expected from the commission by the summer. ssm and srm are like siamese twins, on cannot survive without the other. a supervisor can only credibly do his job if liquidation is possible without undue risks to financial stability. conversely, the resolution mechanism must be able to rely on the well - founded and impartial judgement of the supervisor before putting any funds at his disposal. while a common fiscal backstop is needed for the srm, resolution funds could come from the private sector, namely the financial industry and the banks eligible for the srm. to achieve fiscal neutrality this could be done via private sector pre - funding or via a mechanism that would re - reimburse any loans from the srm ex post via a bank levy. in this way recourse to taxpayer funds could be limited and remain temporary for the srm. the european council has decided to entrust the ssm to the ecb. this has been seen by some as a testimony to the credibility that the ecb has built up as an institution. others regard it as a poisoned chalice, which might put into doubt the very credibility and independence that the ecb has earned itself in the monetary domain. with the ecb set to assume supervisory responsibilities, indeed much has been made of possible conflicts of interest between monetary policy and financial stability, and supervisory tasks in particular. to my mind, such conflicts are pertinent and should not be ignored. hence it is essential that the ssm and all reporting lines for supervisory functions to the bis central bankers ’ speeches

bandid nijathaworn : risk management and pillar ii implementation opening address by dr bandid nijathaworn, deputy governor of the bank of thailand, at the fsi - seanza regional seminar on the implementation of the supervisory review process ( pillar ii ) of basel ii, bangkok, 21 - 24 april 2009. * * * distinguished speakers ; and colleagues from seanza central banks and regulatory authorities, let me begin by extending a warm welcome to all of you to bangkok, and on behalf of seanza members, i would like to express our appreciation to all the speakers, as well as the fsi, for their contributions to make this fsi - seanza regional seminar on the implementation of the supervisory review process possible. this is all the more so as this seminar had to be rescheduled from last year, and in this regard, let me express our commitment that the bank of thailand stands ready to facilitate you and ensure that your experience here will be a fruitful and enjoyable one. ladies and gentlemen, the current global financial crisis underscores the need to strengthen risk management and risk - based supervision, so that we can deal more effectively with the increased complexity arising from both financial product innovation and increased interconnectedness between financial institutions. as for the current crisis, while many causes have been identified, what has become very clear is that financial institutions, capitals were not adequate given their risks, and this had allowed over - leveraging by financial institutions as well as by their customers, leading to over - indebtedness and asset price bubbles. the issue, therefore, underscores the inadequate risk management, covering the entire process : from the lack of proper risk measurement, especially with regard to complex product, as well as liquidity risk, to inadequate risk management and control, and to micro - prudential risk - based supervision. in addition, there is now greater attention being paid to the importance of macroprudential approach, in recognition of the risk from procyclicality and interconnectedness of institutions, especially the large and highly complex financial institutions. also, greater recognition is given to the problem of the unregulated shadow banking sector, like the hedge funds, which are also key in systemic risk process. all these issues pose a major policy challenge, as indeed the various working groups and committees of the bis are now working on the guidelines, and on the key issues such as accounting, valuations, procyclicality, and