The Member State concerned will have to prepare a corrective action plan with a roadmap and the deadlines for implementing adequate measures. Note that this process may end up in sanctions up to 0.1% of GDP, in case of non-compliance by the affected Member State. The procedure for identifying and correcting macroeconomic imbalances is very important and addresses a concern that the ECB has voiced repeatedly in the European context. Also in this case it will be important to implement it fully, while being aware of the unavoidable difficulties, also of an analytical nature, of identifying relevant imbalances ex ante. Macro-prudential policies. Turning to macro-prudential policies, in line with other jurisdictions the EU has equipped itself with a body whose task is to recommend actions to reduce systemic risk in the EU financial sector, the European Systemic Risk Board (ESRB), which is closely associated with the ECB. While the ESRB cannot take direct action, its advice and recommendations carry great weight. In addition, the Single Supervisory Mechanism (SSM) – which I am about to describe in a moment – will assign micro-prudential powers to the ECB for the banking sector of those countries which adhere to the SSM. The ESRB will remain responsible for macro-prudential issues in the EU as a whole and for the whole financial sector (i.e. beyond banks). Financial market union. Let me now turn to plans to establish a financial market union in the euro area.
How the crisis revealed institutional weaknesses in the euro area  As I already noted, the monetary policy response to the crisis has been mainly aimed to buy time for reforms that become effective with some time lag, but it cannot substitute for reforms as time goes by. In this respect, the crisis has unveiled the incompleteness of the euro area’s institutional design which currently policy makers are addressing both at the national level and at the euro area/EU level. Let me first outline these main weaknesses and then go through the progress that has been made so far and the road ahead. The euro area was missing an effective framework for (i) crisis prevention (ii) and crisis management and resolution, which are, as I will argue, essential ingredients for effective policy-making in a monetary union. Let me elaborate. The lack of effective crisis prevention framework before the crisis was indeed evident. First, too complacent regulatory policies in the financial sector still allowed excessive risk to build up. The establishment of the monetary union made is easier for deficit countries to finance macroeconomic imbalances through cross-border capital inflows for too long, resulting in the accumulation of risk. When these flows turned into outflows as the economic environment deteriorated after 2008, these imbalances not only led to problems for the countries concerned but also produced contagion to other parts of the euro area.