economies themselves. similarly, the banking union will not directly limit the share of banks ’ assets tied to sovereign debt. placing strict limits to banks ’ sovereign holdings would rather be a separate regulatory matter and would warrant careful, longer - term deliberations. that said, the comprehensive assessment should enhance confidence in the european banking sector and add impetus to banks ’ efforts to improve their capital adequacy. in this respect, much has already been achieved in the run - up to the exercise. the improved confidence, in turn, promotes provision of healthy credit to the economy and thereby contributes to europe ’ s recovery prospects. • from a longer - term perspective, the banking union will help us prevent and at least mitigate potential distortions and their destabilizing effects on the european financial markets. the ssm will be a key element in addressing banking sector risks before they materialize and, like the ecb in the area of monetary policy, lend credibility to national banking supervision by conducting it with a supranational bis central bankers ’ speeches perspective. i argue that this is a fundamental change in the culture of how european supervision and resolution are conducted. we move from national efforts to prop up domestic banks to appropriate pan - european supervision, i. e. to a system where the structure of decision making matches the international character of the banks and markets. the change does not only include the improved supranational banking supervision, but also other elements. the ssm will be complemented by the bank recovery and resolution directive ( brrd ) and the single resolution mechanism ( srm ). the new legal framework will allow early intervention in troubled banks. it will also make possible the bail - in of banks ’ shareholders, and so creditors help to dissolve the expectation that banks ’ resolution costs would fall on the tax payers. this new resolution regime is backed up by the cross - border risk - sharing via the single resolution fund, which will be financed by the banking industry itself. all this will alleviate concentration of the ultimate liability for troubled banks on any single sovereign. as an important result, the arrangements could decouple the banking industry from the fiscal condition of the sovereigns concerned. why does all this matter for the central banks? financial stability and the central banks ’ key objective of price stability are obviously connected, both directly and indirectly through the real economy. but a stable financial system also fosters greater integration of the financial markets. and the more integrated the financial markets are in the

##4 ) and instructions for crisis resolution ( the brrd ) provides a good basis for this. but we also need to make sure that our national financial stability decisions pay due regard to their effects on other countries. ladies and gentlemen, the main benefit of the banking union is that through it we will correct one weakness in our european financial market structure ; the supranational institutional supervision and resolution set - up will match to the real operational scope and scale of the banking industry. in addition, let me summarize some key benefits for the european central banks ; • monetary policy transmission mechanism made more secured, • prospects for financial stability and efficient functioning of financial markets are improved and • we get a world class banking supervision in europe. bis central bankers ’ speeches