ecb with an effective set of powers that encompass all the elements of the toolbox related to micro - prudential supervision. we can say that the ecb tasks would concern all the span of life of credit institutions, from their birth ( i. e. the authorisation to operate ) to their death. more specifically, the ecb will have the tasks to grant and withdraw authorisations to credit institutions, to assess mergers and acquisitions concerning credit institutions under its responsibility, to ensure the compliance with pillar i and ii requirements and, to carry out consolidated supervision. the ecb will be able to fulfil the tasks allocated to it both by using the direct supervisory and investigatory powers conferred by the ssm regulation, as well as asking for the assistance of national supervisory authorities as appropriate. at this point in time you may wonder what would be the consequences for your banks, once the proposed ssm regulation would be finally adopted and the new system will enter into force. an important point to stress is that the legislative framework agreed by the council bis central bankers ’ speeches ensures full continuity with the existing supervisory system. as i said, the ecb will carry out its tasks within the single supervisory mechanism, working together with national supervisory authorities. therefore, there would be no additional burden for the industry. on the contrary, banks are expected to greatly benefit from the fact that the ssm will facilitate the application of the single rulebook and thus likely reduce the compliance costs for banks with cross - border presence across the participating member states. the ssm and macro - prudential supervision another important element of the ssm regulation is the conferral on the ecb of macro - prudential tasks. let at this point, turn our view back for some years. in most countries, before the crisis, banking supervision was essentially “ micro - based ”. it was mostly focused on ensuring the safety and soundness of individual institutions while taking the rest of the financial system as given. the implicit assumption was that stable individual institutions would automatically deliver a stable system. this micro - based supervisory approach is likely to underestimate the systemic component and is not able to internalise and target the negative externalities that could build up as a result of increased risks for the system as a whole. the lending booms that we have experienced in some euro area countries before the crisis offer a good illustration : during the upswing banks reported high levels of profitability and low levels of measured risk. both of these

and it has illustrated the amplitude of the consequences of the adverse feedback loop between the financial system and the real economy. in a nutshell, it has shown the potential devastating effects of systemic risks materialising in various forms. while a range of risks and vulnerabilities were identified in the run - up to the crisis, the translation of these risk assessments into policy action was generally missing. macroprudential policy aims at filling this gap. financial stability analysis, regularly conducted by a number of central banks including the european central bank ( ecb ) and other institutions ( such as the imf and the financial stability board ( fsb ) ), aims at detecting sources of risk and vulnerability, assessing the overall resilience of the system, and its aggregate ability to withstand shocks. macro - prudential policy adds the policy component to this oversight function. in broad terms, policy - makers tend to agree that the objective of macro - prudential policy is to limit systemic risk, so as to minimise the costs that financial instability can impose on the overall economy. it is important to underline that macro - prudential policy is preventative in its orientation. it should not be confounded with crisis management policy, which is about the resolution of financial crisis once systemic risks have materialised. it aims at containing systemic risk by strengthening the financial system against shocks and at addressing sources of risk and vulnerability as soon as these are perceived as potentially systemic. iii. what is macro - prudential oversight? let me know drill down on what we mean by macro - prudential oversight and the way in which it can be made operational. the crisis has revealed the fundamental importance of systemic risk. the purpose of macroprudential oversight is to identify sources of systemic risk and promote remedial action. as such, a good understanding of systemic risk and its forms is at the core of macro - prudential analysis supporting policy decisions. regarding the various sources of risk regularly monitored by national bodies with responsibility for safeguarding financial stability, the surprise factor was perhaps the form via which systemic risk could be triggered by the collective behaviour of financial institutions and the ways in which they interact in national and international financial markets. the crisis has highlighted the importance of improving our understanding of interconnectedness in the financial system, both via the direct links between financial institutions and the indirect ones created in financial markets. macro - prudential analysis has two main focuses : ( i ) risk surveillance with the view to