These and many more questions need to be addressed in the months to come. Let me only mention the most obvious: •  A European banking supervisor only for the euro area or for the EU 27? A well-functioning financial market union is primarily in the interest of the monetary union. Nevertheless, non-euro area member states should be welcomed to put their institutions under the control of the European banking supervisor. •  A European banking supervisor for all banks or for the systemically important banks only? From my personal perspective, the European banking supervisor should only be entrusted with the supervision of the systemically important institutions on European or domestic level, at least at the beginning. Anything more is neither feasible nor desirable at the beginning of 2013. •  What shall be the division of labour between the ECB and the European Banking Authority (EBA)? From my perspective, EBA could be tasked with any future work on the Single Rulebook in the single market, ie for the EU 27. •  And finally, what shall be the division of labour between the ECB and the national supervisory authorities? It will be key to strike the right balance between relying on local know-how and expertise while safeguarding a single standard of supervision and a level playing field. The implementation of a European banking supervision is closely linked to the possibility of direct banking recapitalisation via the ESM in the future and should not least therefore be advanced without undue delay.
However, the task is complex and banking supervision in itself is too important to present solutions under time pressure that will not work in practice. We should therefore take the time it takes to get it right. Financial stability and monetary policy Having reviewed the additional tasks that central banks are asked to take over, a question regards the implications for the practice of monetary policy. I will hence explain in the following how the two responsibilities will complement each other. The crisis has clearly demonstrated how essential financial stability is for the effective conduct of monetary policy. Financial market developments have always been an integral part of our monetary policy considerations and have influenced the design of our non-standard measures. Nonetheless, in my view and looking forward, monetary analysis and financial market analysis should play an even greater role for the conduct of monetary policy – particularly with regard to financial imbalances and financial fragilities. Here I would see three main areas in which further work is needed to incorporate the lessons from the crisis. First, we are faced with the fact that the smooth functioning of the financial sector is key for macroeconomic outcomes and monetary policy transmission. We saw that adverse financial conditions can have strong and impairing effects on the effectiveness of monetary policy. Academia and central banks have already taken up this research agenda and  BIS central bankers’ speeches  7  macroeconomic models and monetary policy assessments are refined in that regard.