part of the economy. a bank crisis, still possible for many reasons, should be addressed in a unified, european way, minimizing the financial involvement of taxpayers and thus moral hazard. what we should avoid as supervisors is losing sight of these final aims in order to pursue a sort of bureaucratic integrity. more capital and fewer npls is a prudent and sound policy for banks but if, absurdly, capital requirements were raised to 100 per cent of total assets and npls reduced to zero, both stocks and new flows, supervisors would be 100 per cent safe, but the banking business would cease to exist, at least in the form we have known for centuries. credit would disappear and banks would only invest in the equity of no - risk subjects, such as monopolies and rentiers. we all agree that capital markets should be more developed in continental europe, and the financing of our economies more diversified, but bank credit will remain important for many years to come, particularly loans to small and medium enterprises, and its regular flow should not be slowed without reason by the obsession of supervisors to avoid blame if one borrower is late with a payment. i come now to the crisis management framework and the srm. as i said before, the mrel issue needs to be clarified. mrel sets the minimum level of bail - inable items on the liability side of each bank ’ s balance - sheet. the owners of those items ( shareholders and creditors ), once identified, become hostages : if the bank falls into the clutches of the srm, they will be the first to go. a careful and pragmatic calibration of the new requirement is essential. on top of that, banks should be given enough time to meet it without disrupting their business. then there is the issue of financial stability or, more generally, of macroprudential supervision. the srm has given the market to understand that the public interest test – set by european legislation to decide whether to proceed with the resolution or consign the failing bank to the national authorities for liquidation – can only be passed in the case of big banks, whose systemic relevance is beyond doubt. this conveys an idea of systemic risk based only on absolute dimensions. it rules out the possibility that smaller or even mid - size banks, if they fail, pose risks for financial stability, even though they contribute to funding the srm and are subject to mrel. but, at least according to some views,

financial stability can be national or even sub - national, and hence affected by the failure of a local bank. we were talking about the alternative resolution - liquidation, but the criticism may be extended to the no - bail - out principle underlying both. the international monetary fund has suggested a ‘ financial stability exemption ’, whereby it is explicitly recognized that the srm is meant to deal with idiosyncratic events and that the existing arrangements could not solve system - wide crises. 9 imf ( 2018 ). prudential supervision has been micro for decades, if not centuries. the macro - prudential perspective is relatively new and still little understood and not widely adopted around the world. we all know that there can be a tradeoff between micro and macro policy objectives in the financial system. 10 for instance, if we want to protect macro financial stability, we may contemplate bailing out a bank with taxpayers ’ money, but if we want to avoid any moral hazard at the micro level, we have to rule out as far as possible the involvement of taxpayers in rescuing banks. a balance must be found between these conflicting objectives. 5. conclusions let me conclude. in an incredibly short timeframe a comprehensive framework for banking supervision and crisis management in the euro area has been designed and put in place ; thousands of experts are working together to achieve common goals ; methodologies, tools and resources have been pooled in order to benefit from the best national practices ; cooperation between the centralized hubs ( in frankfurt and brussels ) and the national authorities has been fruitful, even in the case of disagreement. last but not least, banks in the euro area are now stronger than 10 years ago. this positive experience shows that the challenges ahead can be successfully addressed in a pragmatic way. banking supervision needs to be constructive, not destructive. this is always true, but in the euro area today it needs to be constantly remembered. prudential rules and practices should be strict but proportionate, and they should always keep the playing field level. we should also take into account the competitive conditions between our banks and banks outside the euro area. we live in times of rapid change in the way financial business is conducted around the world. the application of technology to banks and other financial companies is revolutionizing the market. 11 supervisors need to look forward as visco ( 2018a ). cgfs ( 2018 ), panetta ( 2018 ), visco ( 2018b ). much as they can.