full potential. this might include harmonising the creditor hierarchy, introducing a general depositor preference and removing the overlap between supervisory and early intervention measures from the relevant european legislation. facilitating bank m & a outright failures are one way for non - viable banks to exit the market. mergers and acquisitions provide a second option. nonetheless, we are seeing very little consolidation – either within, or even less so, across borders. there are several reasons for that. uncertainty plays an important role. for a long time, the fear of a euro area break - up kept banks from engaging in cross - border adventures despite the long recovery. this fear should have receded in the same way that regulatory uncertainty has. but there are also other sources of uncertainty. digitalisation, for instance, puts a question mark over the value of large branch networks. in the future, scale might become less of an issue for physical distribution capacity. and then there is uncertainty about bank valuations, which are low across the board. potential m & a targets might not want to sell at what they consider a rock - bottom price ; at the same time, potential bidders might lack confidence because of their own low valuations. in general, many banks still focus on deleveraging and cleaning up their balance sheets as a prerequisite to focusing on growth. this illustrates that consolidation cannot be the panacea. merging two weak banks will not magically produce one strong bank. likewise, when a bank that is in good shape takes over a weaker one, this may not necessarily result in a strong institution, but could actually lead to a larger, less healthy bank. structural inefficiencies are best dealt with at the level of the institution in which they originate. we should not expect them to simply evaporate in the course of a merger. but obstacles to consolidation stem from more than just divergence in national insolvency and tax laws. i have also heard questions regarding the implementation of existing regulations, such as capital treatment of liquidity waivers, the application of the new discretion on gsib methodology, the impact of npl disposals on internal model parameters, and the interaction with resolution strategies. the transposition of eu laws into national laws has also provided loopholes allowing preferential treatment. many countries protect their domestic banking markets by ring - fencing capital and liquidity. unresolved home / host issues may discourage cross - border m & a activity, because they prevent banks from freely allocating capital and liquid

rescued and take on even more risk ; others might go in search of yield with the same result. next, unprofitable banks lack the means to build up capital buffers, which renders them vulnerable. and finally, banks may not be able to cover their fixed costs, which would depress investment in areas such as digitalisation. consequently, one of the goals of post - crisis reforms was to allow banks to fail again. with this in mind, the single resolution mechanism was set up in europe. this provides a framework under which banks can fail in an orderly and well - managed manner. this was certainly a big step in the right direction. but was it big enough? i would argue that we still do not have a truly european approach for handling troubled banks. even though we have a european resolution mechanism, much of the action still takes place at the national level – with all the differences that entails. since it was entrusted with banking supervision, the ecb has only declared very few institutions “ failing or likely to fail ”. and only one of those was resolved by the single resolution board. the others 1 / 3 bis central bankers'speeches were liquidated under national insolvency regimes. the single resolution board decides whether it is in the public interest to resolve a bank that is deemed failing or likely to fail, or whether the bank in question should be liquidated instead. if the bank is to be resolved, this is done in accordance with the framework laid out in the bank recovery and resolution directive, the brrd. but that framework depends on how the home country of the bank in question has transposed the brrd into national law. and such transposition differs from country to country. if the bank in question is to be liquidated, this is done at the national level, according to national laws. and national laws differ a lot. national insolvency and bankruptcy laws are a case in point. i won ’ t deny that there are valid reasons for those differences : legislating for insolvency and bankruptcy deeply reflects the social contract of member states in their cultural and historic diversity. when it comes to the liquidation of banks that are part of a banking union, a more harmonised approach to liquidation would be appropriate. legislators are now considering whether to add a liquidation tool to the european banking toolbox. such an administrative liquidation framework would foster a more european approach. furthermore, improvements to the crisis management framework would help a banking union reach its