Currently, decisions on the supervision and resolution of banks are taken at the European level, while the responsibility for financing deposit guarantee schemes falls on national insurance arrangements. This divergence is not only fertile ground for potential political and institutional conflict, but it also hinders the creation of a true European banking system. We should also explore the creation of a common safe asset for the whole of the euro area. The operations of financial markets and intermediaries require a broad set of sufficiently liquid assets with minimal counterparty risks. This need is greater at times of financial turmoil, given that investors tend to react by accumulating low-risk assets. Within the euro area, the volume of these low-risk assets is insufficient, since the debt of only a small number of countries is considered risk-free. That gives rise to a shortage of such assets and to financial fragmentation. Evidently, an improvement in countries’ fiscal positions might help increase the amount of risk-free assets available. But a common safe asset would have additional benefits. It would contribute to weakening the link between bank and sovereign risks, preventing capital movements towards safe assets that might prove destabilising at times of financial tension. And, more generally, it would promote the fairer provision of more stable safe assets for the euro area as a whole. Moreover, it is worrying that the euro area still has no fiscal policy tools capable of providing for a greater degree of cyclical stability for the Union as a whole.
Addendum 'No Man is an Island' No man is an island entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as any manner of thy friends or of thine own were; any man's death diminishes me, because I am involved in mankind. And therefore never send to know for whom the bell tolls; it tolls for thee. John Donne 1 International Monetary Fund, World Economic Outlook: Global Manufacturing Downturn, Rising Trade Barriers,  Washington, D.C., October 2019. 4/4  BIS central bankers' speeches