of smaller banks. this is how we will ensure a single supervisory culture the length and breadth of the euro area. it is an important step towards a single financial market in the euro area. the benefits of a single financial market i ’ d now like to give you three reasons why a single architecture for the euro area financial market is beneficial – including for smaller german banks. first, price stability in a currency union pays no heed to national borders ; and likewise financial stability – or instability – does not stop at national borders either. the financial interrelationships are far too entwined for that to happen. without common european standards, national supervisors have an incentive to exploit lax supervision to the advantage of their location. this can lower the overall standard of supervision. second, the purpose of banking union is a single capital market. the more capital flows within the euro area normalise, the more long - term bund yields will do the same. these act as a benchmark or anchor for savings rates. third, savers are also taxpayers. as soon as banking union – with its two key elements of a single supervisory mechanism and a single resolution mechanism – is up and running, taxpayers ’ money will be better protected and less in demand for bailing out banks than was previously the case. this also applies to germany. banking union is therefore in no way a transfer union. with single supervision, the first benefit that banking union will bring is to reduce the likelihood of banking crises. if a bank nevertheless gets into difficulties, it must be able to exit from the market in an orderly manner. otherwise sick banks might be shored up by healthy ones. that would definitely be tantamount to a transfer regime, and would be neither in line with market rules nor economically viable. banking union creates conditions and incentives whereby in future, those who enter into a risk also bear the related costs if that risk materialises. and not taxpayers. in concrete terms, what the new resolution rules mean is that those first in line for the costs of winding down a failing bank are those who previously derived profits from it, but who by investing in it also assumed a risk. under the hierarchy of liability laid down in the bank recovery and resolution directive ( brrd ), a bank ’ s owners, i. e. the shareholders, will be called upon first, followed by its creditors. only then, and in extreme circumstances, can taxpayers ’ money be called upon. uniform rules alone cannot achieve this, however. they

the final results. this will enable market participants to familiarise themselves with the type of information they can expect. clearly defined powers many people may be wondering whether the comprehensive assessment has given the ecb too much power. the decision to entrust banking supervision to the ecb was above all a pragmatic one. legislators were looking for a viable european solution within the existing agreements. the aim was to eradicate the previous supervisory culture, in which national supervisors occasionally had an incentive to take decisions that favoured national interests in particular. this was not always conducive to financial stability in other member states or in the euro area as a whole. governments and market participants trust the ecb in its role as an established, supranational institution to supervise the banks impartially and in the best interests of europe. and many in the ecb were also somewhat sceptical to start with. when all ’ s said and done, our reputation is at stake. that ’ s why we have always insisted on certain basic principles, including a strict separation between supervision and monetary policy. these basic principles also apply during actual implementation. for example, we separate monetary policy and supervision by separating employees who are involved in supervision from monetary policy at an organisational level. supervisory work is planned and carried out by a separate body, the supervisory board. the board has already started meeting and is responsible for the ongoing preparations for single supervision. the ecb ’ s governing council convenes separately on issues of supervision. and we are also accountable separately for supervision and for monetary policy. bis central bankers ’ speeches as you know, only the most important banks will be supervised directly by the ecb. this will be done by joint supervisory teams comprising ecb employees, national supervisors and supervisors from the member states in which the banks operate on a cross - border basis. smaller banks will continue to be monitored by the national supervisory authorities. for most of you, this therefore means they will continue to be supervised by the bundesbank and bafin, which know the characteristics of both the german banking system and your banks inside out. the important thing is that all participants play by the same rules, regardless of the member state in which they are based. the ecb will ensure that this is the case. first, it will keep a close eye on the work of the national supervisory authorities and ensure that strict supervisory standards are maintained everywhere. and second, the ecb can, where necessary, take over direct supervision