have to be prepared for failure scenarios and guarantee smooth resolution. importantly, resolution and solvency policies are not aimed at identical issues. in fact, crisis management maintains financial stability in a different way, namely by making sure that bank difficulties do not negatively impact private savings or market discipline, something which cannot be achieved effectively through solvency regulation. there are several ways to read the most extensive institutional reform in europe recently, the so - called banking union. clearly, the euro zone faced serious distress, and our institutional framework had not proven credible nor effective – market reactions showed this quite unmistakably. through the lenses of evolutionary adjustments, the move towards the banking union was a patch to our historical supervisory system, because it, too, had shown to be a living organism that had reacted in an undesireable way to the financial crisis. the most developed part of this banking union is the single supervisory mechanism, which has rearranged the supervision of 129 of the largest and most significant institutions in the euro area, thus improving supervision in a number of ways. given the fact that even supervisors are prone to error or even bias, the mechanism builds upon international teams under the auspices of the ecb, with the favourable effect that national interests are dampened. on top of this, supervisors ’ hands are tied to a greater degree as the setup makes it easier to compare supervisory measures and results. last but not least, all supervisory and organisational decisions have to be approved by a common board, so that all national competent authorities have their say in the joint architecture. in everyday - life, the vast amount of decisions consume quite a lot of resources in national authorities. but from a financial stability point of view those institutional frictions and even opposed interests are manageable inasmuch as institutional rivalry may enhance checks and balances. in sum, the single supervisory mechanism has changed supervisory incentives. it remains to be seen whether another pillar of the banking union, the single resolution mechanism, will improve effective resolution in a similar fashion. 4. conclusion ladies and gentlemen, i began this speech by posing the question : will the post - crisis regulatory and supervisory regime a project be finished soon? my response to this question is that while the basel iii reforms are set to be finalised by the end of the year and while there are no further reform plans in the policy pipeline, i feel we should frame the overall question a little differently. in my view, the supervisory and regulatory changes witnessed in europe and in many other parts

banks also have an impact on small community banks. these institutions do not inherently require the same rules as international banks. on the contrary, these rules may interfere with the important role that they play in the economy. i will come back to this subject later on. for now, my point is a general one. when thinking about the future of international relations, ignoring national political constraints does us no favours. instead, we will need to tolerate some degree of international diversity. the first consequence is to take note of the ongoing necessity to balance national and international goals. the second consequence is to identify those instruments that serve these goals most effectively. today – and across policy fields – we are still figuring out how this can be achieved. but what does this mean in practice? going beyond political speeches, redefining the balance of global cooperation and national sovereignty will be a demanding process involving many technical and political decisions, where it may make sense to opt for greater harmonisation in some cases and for greater divergence in others. that ’ s why we do not have a simple, universal blueprint. let me outline some of the developments in three crucial areas of future cooperation : the breadth and depth of financial globalisation and cross - border banking, global regulatory standards, and supervisory cooperation. 3 implementing basel iii : the limits of global regulatory standards let me start out with the task of balancing global regulatory banking standards and regional peculiarities. in december of last year, the basel committee on banking supervision finalised the basel iii agreement after eight years of global cooperation to devise the complex set of rules. as i am a strong supporter of implementing this standard in the european union on a binding basis, i very much expect that the us authorities will take a similar view. only if both the united 2 / 5 bis central bankers'speeches states and the european union keep their word and implement basel iii faithfully – and in its entirety, which means including the fundamental review of the trading book – we will avoid regulatory conflict or arbitrage and be able to provide a reliable framework for international banks. however, please note two qualifications : these are minimum standards for internationally active banks. since basel standards are minimum standards, a country may decide to set stricter requirements. for example, switzerland has a higher leverage ratio. and the united kingdom has ring - fencing rules in place that separate a bank ’ s vital basic functions from its riskier ones. this policy is not of the basel committee ’ s making, and the united kingdom