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For the countries of the eurozone, Banking Union means further in-depth integration of the financial market, first of all by the Single Supervisory Mechanism (SSM). The European Central Bank will start working as the European banking supervisor in the the 4th quarter of this year. There are two things that I consider particularly important:
First, the consistent separation of monetary policy and supervision in daily supervision practice. As I have said, I would have preferred if we didn't have to ensure this separation under the same roof, but treaty change would have been required to achieve this.
Secondly, the ECB's supervision will focus on "significant" banks of the participating Member States. The other banks remain the responsibility of the Member States and their national regulators. We will continue to insist on this principle of subsidiarity. And as provided for under European law, the ECB must take the size and the diversity of the banks' business models into account in performing its duties.
Before Christmas, we cleared the way for negotiations with the European Parliament on the Single Resolution Mechanism (SRM) and for the conclusion of an intergovernmental agreement. Apart from the banks under ECB supervision, the SRM should only cover banks that are operating across borders. For the other banks, national resolution authorities will remain responsible. It is equally important that the SRM will come into effect at the same time as the rules for creditor participation. It further needs an efficient decision-making process. The resolution of a bank must not be delayed by national interests and conflicts. So it is right that resolution decisions should be taken by the resolution board; this is where the expertise is located.
To finance the resolutions that are decided, a resolution fund is to be built over the next 10 years from contributions by the banking sector. Smaller institutions should thereby be better off than large banks with high systemic risk. Until the settlement fund has sufficient resources, the Member States must remain responsible, because only the Member States can ensure the collection of this levy - such is the European law. If necessary, a Member State can make an application to the ESM - according to the existing rules, with strict conditionality.
I know that many think we should stop introducing ever more additional regulations. I do not agree with this, and actually there there have been misunderstandings. This is no accusation but simply experience: markets are very creative in the use of their (regulatory) environment, and this is certainly the case in the globalised financial world. Regulatory rules can never anticipate what the innovative power of markets might come up with, nor should they. Regulartory frameworks respond to these innovations - and accordingly, we will continue our path of adjusting and advancing regualtion.
But we know that a successful real economy is dependent on the performance of the financial sector and financial centres. We know that we must continue to reinforce their trust in order to achieve more capital market-based financing. We would like to encourage a dialogue; we ask the financial sector to help and put their energy and expertise not only in fighting off new regulation. With their help, we want to find better regulation and enforce it internationally. We need to create this together in order to reduce risks.
Full speech (in German)