Enlarged participation in the SSM is a great opportunity for setting a level playing field in supervisory practices across the EU. At the same time, a series of conceptual questions need to be addressed. For one, it is hard to imagine that countries not participating in the European Stability Mechanism (ESM) might act as a financial safety net for troubled but solvent banks, in the event that a privately financed resolution fund is not yet adequately funded. The next steps The establishment of the SSM represents a great opportunity for financial integration in Europe. Let me now turn to the next steps in the establishment of the SSM. First, the swift adoption of the SSM Regulation is essential. Definite plans are crucial in order to uphold the current momentum of the stabilisation of the euro. The general expectation is  4  BIS central bankers’ speeches  that the SSM will be established early this year, with an effective operational start 12 months later. Second, the design of a supervisory model, including the allocation of tasks between centre and periphery is critical for the success of the SSM. In this regard, work is already under way by the ECB in cooperation with national competent authorities – subject to the final legal wording. Third, the SSM will need to carry out a comprehensive review of the banks that fall under the direct supervision of the ECB.
Various actors in the economy may be relieved from pressures to take up their own responsibilities, thereby lowering the incentives to correct imbalances, unwind past excesses and redress the course of unsustainable economic and financial policies. BIS central bankers’ speeches  3  Second – and more fundamentally – non-standard monetary policy cannot solve the underlying structural economic and financial problems. The banking union – restoring financial stability and reintegrating financial markets The banking union aims at building an integrated financial framework to safeguard financial stability. To this end, it is absolutely imperative to have both an EU framework for single supervision, the SSM, as well as an integrated resolution framework, the SRM. Stability comes from having two pillars. The Single Supervisory Mechanism One particular institutional shortcoming of Economic and Monetary Union (EMU) derives from the inconsistency between a single monetary policy and national supervisory competences. A step up of supervisory powers to the supranational level was therefore needed to reverse financial fragmentation, with a view to breaking the link between sovereigns and banks, restoring the principle of self-responsibility and avoid objectionable transfers. By centralising supervision, the SSM should ensure uniform practices across Europe and overcome the home-host cross-border supervisory discussions and the associated national bias. The establishment of a single supervisor marks a new epoch in the EU financial framework, which may be comparable to the creation of monetary union at the end of the last century.