undesirable effects also for the conduct of monetary policy. a final objective of banking union is to increase the efficiency of the banking system which is the dominant source of finance for the european economy. this will be achieved in different ways. first, the ssm will be a strong and independent supervisor, enforcing supervision consistently across the participating member states. with supervision at a european level, the focus of supervisory activities will be aligned with the activities of cross - border banks and the area - wide financial sector, thus less subject to domestic considerations. with a micro - prudential task and an extensive set of powers, the ssm should be able to monitor risks faced and stemming from individual banks in the system and address them in a timely fashion. this is supported by the macro - prudential task conferred to the ecb entailing the monitoring and addressing of risks from a system - wide perspective. the fact that the ecb has been given power over the direct application of macro - prudential instruments as well as a coordinating role among all member states, is an important innovation of the new regulation that will improve financial stability in the euro area. furthermore, the ssm will have a european focus and support the development and effective application of the single rulebook, the harmonisation of supervisory practices and procedures, creating a level playing field and reducing compliance costs. the ssm, coupled with the other elements of the banking union should be conducive to ensuring the most efficient allocation and transfer of intra - group capital and liquidity. therefore, it should contribute to the creation of truly paneuropean banks and enhance cross - border banking integration which will reduce transaction and compliance costs and bring efficiency gains. on the other hand, the new framework may lead down the road to a period of consolidation in a not much concentrated european banking sector. in fact, there is scope for further consolidation without reinforcing the so - called “ too - big - to - fail ” problem and for reaping the benefits of efficiency - driven consolidation. the present weak profitability in the banking sector and the existence of over - capacity in certain areas of the european market suggest that some efficiency gains could be achieved. authority, helsinki, 12 february 2013 ; towards a european banking union, speech by vitor constancio, vicepresident of the ecb, lecture held at the start of the academic year of the duisenberg school of finance, amsterdam, 7 september 2012 ( ecb website

). see “ the european crisis and the role of the financial system ”, speech by vitor constancio, vice - president of the ecb, at the bank of greece conference on “ the crisis in the euro area ” athens, 23 may 2013 ( ecb website ). bis central bankers ’ speeches besides these fundamental goals, banking union also involves two practical aspects of more immediate concern that i will now address : ( i ) the repairing of banks ’ balance sheets to unclog the impaired credit channel and consolidate the on - going mild economic recovery ; ( ii ) the reduction of the bank - sovereign loop in order to further mitigate the remaining financial fragmentation6. i will complete my remarks by addressing the role of the srm as the necessary complement to the ssm in the banking union and finally, by dwelling upon the broader implications of banking union for european integration. i will only briefly touch upon the ssm as my colleague daniele nouy will elaborate on ssm issues during her speech later today. bank recapitalisation and the economic recovery in the past few years, one could hear many voices urging european policy makers to repair the balance sheets of banks so that these could again lend to the real economy and jump start gdp growth. there will be no growth without finance, the narrative goes. in this vein, the fact that the u. s. has returned to robust economic growth faster than europe has been, to a large degree, attributed to policy - makers acting quickly to repair the balance sheets of u. s. banks. this narrative, while intuitively compelling, is missing two crucial points. the first is that euro area bank balance - sheet repair has started for some time already. as i recalled recently7, since the onset of the global financial crisis, the top 20 european banks have increased capital, net of share buy - backs, by higher amounts than the corresponding top 20 american banks : usd 289 billion by eu banks against usd 179 billion by u. s. banks. and according to the fdic, the leverage ratios of the biggest european banks, calculated according to the same accounting standards, are very close to their american peers8. furthermore, since midlast year in particular, european banks have implemented write - offs and increased provisions and capital, partly anticipating the comprehensive balance - sheet assessment that the ecb is conducting this year. our estimates based on public information indicate that ssm banks ( comprising 128 institutions ) have, from july 2013 to april 2014