stop, at least for some time. we need, first, to give a minimum of stability to the regulatory framework ; second, to take stock of the work done and gain experience to evaluate its longer - term effects ; third, and perhaps most importantly, strike a balance between securing the financial system and avoiding rules that would overly penalize risk - taking, without which no growth is possible. at the beginning of this year the group of central bank governors and heads of supervision of the g20 instructed the basel committee to refrain from ‘ significantly increasing overall capital requirements ’ 1 at this stage. the basel 3 package is currently being finalised on this premise. while agreement is not yet assured, i think we are close. let me take this opportunity to say that my firm view is that an agreement is necessary to give certainty to the financial world. the conditions are there and we should not miss the opportunity. assuming such an agreement can be reached, in the field of banking regulation the next few years should be devoted to maintaining the regulatory system, not to overhauling it radically once again ; we also need to review the rules, by checking for any embedded procyclicality or other unintended consequences, rather than establishing further capital requirements. efforts to limit banking risks, however, are only part of the answer. the financial landscape is changing apace. the growth of intermediaries outside the banking sector points to the need for new micro - and macro - prudential tools. work has begun in this area but much remains to be done. furthermore, a host of innovations ( digital currencies, distributed ledgers, peer - to - peer lending, crowdfunding, to name but a few ) have opened new frontiers for financial services and started to blur the boundaries of the financial sector itself. there is great potential for financial inclusion and efficiency gains here, but there are also implications for monetary operations and transmission, as well as new risks to stability, integrity, and end - user protection. this raises issues about the group of central bank governors and heads of supervision ( 10 january 2016 ) ; as stefan ingves, chairman of the basel committee, recently noted, this must be one of the most frequently cited phrases in regulation debates these days. perimeter of financial regulation and the appropriate regulatory and policy measures. the fsb and various standard - setting bodies have already conducted a broad discussion on general themes like definitions, opportunities and risks ; it is now time to turn to discussing concrete policy questions.

##optimal distribution of efforts across countries. automatic stabilizers embedded in a common budget, on which the discussion has mostly focused so far, would partially free national budgets from the pressures arising from adverse cyclical conditions. a common budget, however, could also be used to adopt discretionary measures consistent with the cyclical conditions in various economies and in the euro area as a whole. discretion does not mean total freedom from constraints : just as they have been introduced at the national level, constitutional limits on spending or deficits can be set at the european level. it only requires acknowledging that it is impossible to govern public finances by rules alone ; that no complete contract exists in public finances that can allow a democracy to dispense with open, transparent debate on budget decisions ; and that, to the extent that spillovers and the common good require the imposition of significant constraints on national budgets, some fiscal space must be found at the european level. just to be clear, a common budget for the future does not imply mutualisation of past debt. that is a different discussion. no mechanism should entail permanent transfers across member states. not only would this be politically unfeasible. my own experience with regional differences in italy tells me that structural fiscal compensation of economic disparities eventually does not end them – it entrenches them. so, for instance, any eu - wide automatic stabilisers should be designed to be geographically neutral in the long run. the need to complement rules that constrain local action with the constitutional capacity to act at the european level could be illustrated using several different examples besides the fiscal budget. bank supervision and resolution is another obvious example. time constraints prevent me from going into detail on this ; i will leave that for another occasion. but let me just briefly say that, while banking union has progressed considerably, it must ultimately incorporate all the elements envisaged in the original design : a single supervisor, a single and effective resolution mechanism, with pooled resources and the determination to use them when necessary, a common deposit insurance scheme, and finally a european public financial backstop. this requires effective european resources and decision - making powers, so that institutions can act swiftly, boldly and freely when needed. building the capacity to act at the european level, and not just rules to constrain national action, requires trust and institutional foresight. many would say that the current circumstances make such steps politically difficult. there can be no question of trying to forge ahead with