None of these changes is obvious, to say the least, but none should be taboo. II. Supervision: lessons from an active euro area model Fair enough about implementing Basel III; but then comes the next suspicion: Credit Suisse failed despite being Basel III compliant. The answer is clear: good regulation is necessary; it's never sufficient. The risks generated by specific business models such as the asset-liability mismatch at SVB or the weak profitability and weak internal controls that dogged Credit Suisse should typically have led to higher supervisory requirements. Supervision should not be seen as a static business; it must be active and tailored to banks characteristics. This is precisely the spirit of the "Pillar 2" in the Basel framework, with the annual Supervisory Review Process. I sometimes hear doubts about supervision, which some believe should be treated as a legal dialogue, cautious in its form, and slow in its effects. No: supervision can and must be intrusive – including on-site –, exercised by highly skilled practitioners, quick in its reaction, strong in its powers. This is not wishful thinking: it has been our experience for decades in the French ACPR, and now for years in the European SSM. Active supervision is indeed one of the great successes of our European Banking Union. In light of the recent reality test, I believe there are two lessons to be learnt from our model.
Because if we are, the instant effectiveness of some forward-looking commitments and guidance that should never have been issued at all, will give way to a much longer-lasting decrease in our ability to guide the markets in the future, and thus to an increase in the risks faced by each and every economic agent. Our mandates and institutional frameworks may develop, but our primary objective of assisting economic development and growth by preventing abrupt changes in economic indicators – be it the price level or broad measures of the stability of financial systems – will very likely stay unchanged for quite some time to come. Generally speaking, the goal of central banks is to provide some certainty in fundamentally uncertain economies, the uncertainty being based largely on the workings of their monetary systems. In pursuing this goal, we will need three things. First, we will need external recognition of the importance and usefulness of our independence. Second, we will need to nurture good relations with our colleagues; we have made great strides in this area, but much remains to be done. And finally, in our inner circles we will need the support of our nearest and dearest. So, let me end by thanking my wife for being such a rock of support in my life, my parents for teaching me that things should be done properly or not at all, and my kids for being such a joy every time I am with them. Thank you. 2  BIS central bankers’ speeches