We will have to devise a system to make ECB responsibility compatible with a rational division of work, so the ECB will have the direct oversight of significant banks with the cooperation of the national competent authorities. The direct supervision of the Less Significant Institutions is for the National Authorities, which will have to comply with regulations, guidelines and general instructions issued by the ECB. In fact, the ECB will indirectly supervise such banks, having access to their data and the power to assume, if so decided, the direct supervision of any of them. It is important to underline that this is not going to be a two-tier system, but a single one with a distribution of tasks; this is not going to be a “confederation” of supervisors, but an “Union” of supervisors under a single European authority. Preparatory work already done to launch the Single Supervisory Mechanism At this point, I will briefly describe the work we have done, how the SSM is going to be set up in organisational terms, and the work ahead of us. Steered by a High-Level Group on Supervision, chaired by the President of the ECB, a preparatory structure has laid down the work schedule regarding the following areas: (i)  The mapping of all the EU banking institutions, to determine the supervisory regime applicable under the Single Mechanism Regulation.
2  BIS central bankers’ speeches  From my perspective, Japan’s experience with forward guidance for the policy rate, asset purchases and a more formal inflation goal are particularly instructive, as this helped inform the later use of such tools in the United States. In early 1999, the Bank of Japan said it would maintain its zero interest rate policy until “deflationary concerns” were “dispelled.” This commitment was lifted in August 2000, and the BoJ raised the policy rate by a quarter-point. However, the BoJ was subsequently obliged to reverse course, and reintroduced forward guidance in March 2001. This guidance was tied to the realization of a new inflation objective. With deflation intensifying, the Bank of Japan embarked on a quantitative easing (QE) program in 2001 designed to increase the size of the monetary base. The Bank of Japan engaged in purchases of JGBs that were large in scale, but confined to short-dated maturities. This reflected a view that such purchases primarily acted through the liabilities side of the central bank's balance sheet – pushing up the amount of reserves in the banking system. Because the growth of the monetary base was deemed the goal of policy, it was logical to purchase short-dated assets, which could be allowed to run off once a sustainable recovery was in place. The downside of this approach was that the purchases did not change the composition of the private sector’s balance sheet very much because the policy essentially resulted in the exchange of one short-term risk-free asset for another.