risk. the banking union will ensure a sounder monetary union. germany has expressed doubts as to the proposed set - up, in particular with respect to the number of banks covered by the ecb. could this prove a threat going forward? the proposed union implies a transfer of sovereignty from states to the ecb, which germany has always wished for. as regards the scope of supervision by the ecb, there were no doubts that all banks had to be covered. the problems often stem from small - or mediumsized banks, as we saw in ireland and spain. to ensure credibly vis - a - vis the markets, across - the - board coverage is necessary. bis central bankers ’ speeches in practice, how will the tasks be divided between national supervisors and the ecb? the legal responsibility for supervision would be transferred to the ecb, but in concrete terms, national supervisors would continue to supervise banks on a day - to - day basis. in fact, it is a mechanism similar that of the eurosystem : under the authority of the governing council, the supervision committee, bringing together the ecb and the heads of national supervisory authorities, will coordinate supervisory actions and the allocation of tasks with the national supervisors. in practice, the ecb would be responsible for major decisions regarding prudential supervision : assessing capital adequacy in relation to risk, compliance with regulations, etc. i would also like the ecb to have decision - making powers in dealing with cases of distressed banks. questions remain as to division of powers between the ecb and the european banking authority ( eba ) the distribution of tasks seems clear to me : the eba is the european body responsible for banking supervision. it sets prudential rules and standards and ensures that they are applied ; the ecb will be the euro area bank supervisor. the eba ’ s governance arrangements will have to be changed slightly, as the commission proposes, to take account of the banking union. the uk has nothing to fear from the creation of a single euro area supervisor. what would have changed if the european supervision system had have been in place, for example for the credit immobilier de france ( cif )? technically, not a lot. instead of the french autorite de controle prudentiel, the ecb would have asked the cif to increase its capital. but make no mistake, banking supervision is not a catch - all insurance. in the case of the cif,

we were aware of its fragility stemming from its increasing refinancing difficulties and we knew that there were longer - term liquidity risks. the cif is a textbook case where a downgrade by ratings agency expedited the disclosure of funding problems. would you say that moody ’ s was responsible for this situation? no, the primary responsibility lies with its management, which was unable to find a merger solution when it was possible and we had asked it to do so. did you lack coercive power in this case? yes, definitely. we have very great powers when an institution does not comply with regulations, but we do not have powers that enable us to prevent a crisis. as things stand, we can appoint temporary administrators if need be or revoke an authorisation, but we do not have powers of resolution allowing us to impose the restructuring of a banking group or transfers of assets. we worked on a draft regulation before the european project started to be discussed, but we underestimated the length of time needed to arrive at a european proposal. i regret this somewhat as it would have been useful for us. is the french banking system still sufficiently robust? in fact, french banks are increasingly robust as they are reducing their risks and increasing their capital. the reduction of risk has resulted from the selling - off of business lines, often abroad, and a scaling - back of some market activities ; the increase in their capital reflects the setting aside of profits that remain substantial thanks, in particular, to the resilience of retail banking in the face of the economic slowdown. their core tier 1 capital grew by 0. 5 percentage point in the second quarter and they have exceeded the target set by the eba. in terms of liquidity, they have managed very well the withdrawal of us money market funds last year by adjusting their assets, as well as the rebalancing of their sovereign bond portfolios. this goes to show that, if it is based on a sound internal model, the universal banking model works well. bis central bankers ’ speeches do you remain opposed to the separation of investment and retail activities? i really do not understand the benefit of this principle of separating activities. the only thing i wish to see is the outright prohibition of speculative activities and stronger internal controls for the risks associated with market activities. otherwise, banks should be able to serve their customers, whether they are private individuals, companies or institutions, in all of their operations – on bond markets, fore