The new rules under Basel III require banks to hold more and higher-quality capital than ever before. At the same time, we have agreed on an international liquidity standard for the very first time ever. As soon as the new rules are finally in place, banks will be much more stable. Yet rules are merely the foundation of a stable banking system.
Someone also has to ensure that the rules are applied – that is a matter for banking supervisors. And, with regard to Europe, a further element enters the scene: the banking union. In early October, the EU economic and finance ministers formally agreed to establish a Single Supervisory Mechanism (SSM) as the first pillar of the banking union.