8  projects mean that the main mechanism for financing the public deficit continues to be traditional access to markets. An aspect I would like to underscore regarding the economic policy response to date is the high degree of complementarity of the measures adopted by the different authorities. If the ECB's response and the decisions of the European Council have enabled governments to expand the scope for fiscal action, it is the action taken by the latter and the ECB itself that has been vital for guaranteeing liquidity and reducing risk for non-financial corporations. This, along with the decisions taken by micro and macroprudential authorities and the ECB, has helped sustain the flow of credit to economic agents. It is very important that this degree of complementarity is maintained in the future. Outstanding European architecture reforms This crisis has also shown that, despite the progress of recent years, further improvements are needed in euro area governance. In particular, beyond the importance of having access to a recovery fund with the characteristics described above, we must continue to stress the major limitation for the proper functioning of the euro area of not having a permanent macroeconomic stabilisation mechanism that allows for greater risk-sharing in response to economic shocks.
In my opinion, this work is going in the right direction. For example, we have a general agreement that not all SIFIs are the same or pose the same degree of risk to the system, and that the framework should recognize this. Along the same lines, the idea is to have a system which builds in a sufficient degree of supervisory judgement to reflect aspects that cannot be quantified, but balanced with “constrained discretion” and a peer review process to ensure that there is a level playing field. And I think, and others think, that the resolvability of an institution should be taken into account in determining the systemic risk of a Global SIFI. For instance, a proper “living will” is a mechanism to reduce the impact of a bank failure and, therefore, to reduce the systemic risk these institutions pose. Finally, the FSB places strong emphasis on the importance of intensive supervision. The aspect of the FSB approach to SIFIs which has attracted most attention is the setting of higher capital requirements (or “loss absorbing capacity”) for SIFIs. We would be extremely naïve to think that extra capital is the answer to systemic risk. Holding extra capital does not resolve the problems of poor management or ill-advised risk taking. And we will never be able to require SIFIs to hold a level of capital sufficient to absorb the huge costs related to their potential bankruptcy.