exchanges within jsts have proved rewarding. in addition, the ecb has already harmonised its use of roughly 100 regulatory options and discretions that were meant for specific national situations but led to an inconsistent framework in the ssm area. overall, banks are said to mark their new supervisory counterpart as tough but fair. in today ’ s difficult financial environment, i am inclined to read this feedback as a compliment for the ssm as a whole because we seem to manage two roles at once : the role of a referee to ensure fair play and a level playing field and the role of a diligent doctor to ensure that our patients remain sound and healthy – prescribing a bitter pill when necessary. 3. european supervision – a continuing everyday challenge improving processes and cultural learning take time. and there is no doubt that it will be an ongoing challenge to ensure steady and high supervision quality that reflects both banks ’ individual risks and their changing environment. let me emphasise a few challenges the ssm faces with direct relation to supervisory quality. my first example deals with our own impact on the sector ’ s diversity, which is reflected in the differentiation between 120 significant institutions that are directly supervised by the ecb and about 3, 500 less significant institutions that are supervised by national authorities. it goes without saying that a broad information base is vital for the purpose of financial stability. banks themselves ultimately profit from insights into financial cycles and threats to the financial sector. but i fear that our data requests require resources in banks that are more easily provided by large institutions. we should assess in an open - minded manner whether the costs and benefits of our supervisory curiosity are always aligned with respect to many small banks. what is more, sector diversity also requires that factors other than size be taken into account : these include business models, the changing regulatory and financial environment and even societal trends such as digitalisation. it should be in our interest to safeguard a level playing field, not only with respect to special national treatment but also with respect to risk - adequate supervision. protecting variety in banking is one way to enhance sector stability. therefore, i appreciate efforts from the ecb to widen the perspective of banking supervision beyond the level and quality of capital towards proportionality. bis central bankers ’ speeches there are other challenges that concern the supervisory quality and long - term functioning of the ssm. i am thinking especially of our most valuable resource, namely well - trained and motivated staff. therefore, i strongly support initiatives such as the ese initiative

andreas dombret : resilient banks – essential building blocks of a stable financial system speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the 18th annual banking and insurance conference “ making finance work in a higher capital world ”, organized by bank of america merrill lynch, london, 24 september 2013. * * * introduction ladies and gentlemen many thanks for inviting me to this year ’ s conference. it is a real pleasure for me to speak before you today because i spent many years of my career in the private sector. today, however, i speak to you as a central banker and thus from a regulator ’ s point of view. from time to time banks and regulators are portrayed as opposing forces. to me, this seems a bit off the mark – not least because i know both sides rather well. in the end we all share the same objective : a stable financial system. and a natural starting point from which to build a stable financial system is the individual bank. banks are the elementary building blocks of the financial system and to ensure financial stability we need resilient banks. what defines a resilient bank? but what is a resilient bank? to begin with, a resilient bank is able to withstand shocks. a resilient bank enjoys the confidence of investors and customers. thus, it will receive funding – both wholesale and retail – at adequate prices even during periods of stress. but how do investors and customers recognize a resilient bank? is it like the famous giraffe : hard to describe but you know it when you see it? well, there are certainly times when this is the case. usually, however, resilient banks have specific characteristics that set them apart from other banks. in my remarks today i would like to discuss three of these characteristics – three pillars on which resilient banks rest. 2. 1 capital and liquidity buffers capital and liquidity buffers should be regarded as the centre pillar. capital provides a cushion to absorb losses during times of stress. and with the benefit of hindsight, it is now widely acknowledged that prior to the crisis banks ’ capital buffers were neither high nor solid enough. the same is true for liquidity. banks ’ role in financial intermediation makes them particularly vulnerable to liquidity risks. and a lack of liquidity can break a solvent bank ’ s neck. after all, a liquidity squeeze was the defining element of the