 It has been my pleasure to come to Dublin to discuss this with you everything relating to the banking union as you wish, you know. And I think this is the banking union project of a real great importance to Europe. And the title of my remarks refer to the German perspective and I would like to talk with you about my vision or that of the Deutsche Bundesbank. And I will make no secret of it. I have a case to put before you today. One of James Joy's most famous literary character, Stephen Daedalus, once observed that errors were the portal of discovery. Having failed to prevent the crisis in the first place, policy makers and supervisors alike are at least rightly being called on to learn the right lessons. One of these lessons is the banking union, which was launched in June 2012. The Eurozone Summit resolved, amongst other things, to transfer banking supervision to the ECB. Further elements were added in December 2012. Then we talked about the single resolution mechanism here in the Euro area and the single European deposit guarantee scheme, which was discussed at that time, too. Adding a single resolution mechanism to a single supervisory mechanism is, in my opinion, not just a good idea, but one whose time has come. Control and liability should go hand in hand. And that does not only fit to the banking union, but to everything we are discussing with respect to the sovereign debt crisis, too. But a European resolution mechanism likewise needs harmonized standards and instruments, which are currently being developed with the EU Bank Recovery and Resolution Directive. And if I may say so here, the Irish presidency has distinguished its admirably during these difficult negotiations. They did a real good job, you know, the last half year. They had a lot of real problematic issues on the table, and they did a very good job. The third pillar of a banking union, a European deposit insurance scheme, is currently not regarded as a priority task. I concur with this view. After all, a deposit insurance scheme is a promise by a government to its depositors to identify them to a certain degree in the event of a crisis. A joint deposit insurance scheme would thus necessarily mean joint liability of the member states' taxpayers. However, joint liability in this area requires joint European control and economic and fiscal policy. And we are nowhere this stage, you know. And when we are talking in the European, you know, area about solutions for the crisis, always at least from the Bundesbank side have this, you know, image, this picture of a balance between liability and control. And when talking to other countries, I do not see any, you know, any fun for the idea of losing sovereignty in other aspects than banking supervision. However, there are more conditions to be met for an effective and efficient banking union, which concerns material supervisory legislation. A centralized European supervisory regime requires common supervisory rules. And we just talked during lunch about this issue. It would be very difficult to put together an equal treatment based on 17 different national legal system. It would be a huge task to do. The adoption of the capital requirements regulation and capital requirements directive and their probably entry into force on the 1st January of 2014 have brought us a major step closer to a single rulebook for banks and supervisors alike. I would also like to give my warmest thanks and congratulations to the Irish presidency here. Two, for the negotiation and organizational skills in this phony matter. One on which no fewer than four presidencies had to work and very hard at that. So well done again for the Irish presidency. Where do things now stand with regard to the single supervisory mechanism, the SSM? Where do I stand? A fundamental political consensus has been achieved. A formal resolution in Germany is still pending. However, as a significant transfer of power requires a two-third majority in each of the Germany's two houses of parliament. The required majority was reached in the Bundestag or lower house on 14th of June this year. And the Bundesrat, the upper house, will vote on the 5th of July. I trust that everything will go smoothly and that the single supervisory mechanism regulation will enter into force in the late summer. I really do not expect the Bundesrat to be against it, at least I do not believe. We never can say, you know, but I think it will, it will go smoothly. So that in the second half of 2014 the European Central Bank can start supervising banks in cooperation with the national supervisors. I expect major benefits from the forthcoming European cross-border supervision of banks. I'm really a believer in the European supervision. The last five years in particular have brutally shown us that crises do not stop at national borders, especially in a monetary union. As an advantage of the SSM will be that it will draw on a broader and better basis of information across the eurozone, thereby making it possible to reveal undesirable developments more quickly. If designed correctly with a strong arm in benchmarking and peer review, you know, we for example do not have a peer review for Deutsche Bank in Germany. So I'm looking forward to have this possibility on the euro area. So with a strong arm in benchmarking and peer review we can uncover trends in individual business lines and in risk management much sooner in future. I also expect this to be a major step towards the consistent application of the supervisory rules as a second pillar of the single rule bit, so to speak. I'm hoping that European supervision in teams of supervisors from various nations will provide a new approach which incorporates the best elements of each nation's approach to supervision. This new approach will leave no room for home bias. It will leave no room for supervisory regime which is stuck in the past perhaps in traditions. However, the SSM also has some major weaknesses and I would like to single one out for a particular emphasis. It has to do with the fact that the final say on central decisions taken by the ECB and thus also in the SSM rests with the governing council of the ECB. It is true that these decisions will be prepared in a supervisory board composed of representatives of all eurozone national supervisor authorities and central banks. And that the governing council of the ECB can only accept or reject the proposals. A mediation panel will or would resolve disagreements between the supervisory board and the governing council. However, in the governing council there we have the ultimate responsibility no matter what. And I have misgivings about these set up for two reasons. First, this governance structures is quite complex and its functional viability still needs to be demonstrated. I admit that aside with the skeptics here and second it will not be possible here to draw a clear line dividing monetary policy and supervision. And the single supervisory mechanism regulation only goes as far as EU primary law allows. And primary law just says that the last decision making body is the governing council. I therefore see the ECB facing conflicting aims price stability and a stable banking system. This conflict of aims can threaten the ECB internal independence. Over the medium to the long term I believe it would therefore make sense that it is necessary in fact to put the SSM on a sound legal footing. There is no getting around changes to primary law to improve the governance structure and to draw a clear line between the monetary and the supervisory function. I'm convinced that we need to tackle the issue of these changes. Please do not misunderstand me. I don't want to postpone the SSM. I just want to start with the SSM on the basis we have now and I want to start with changing the EU primary law because it needs some time. Exactly at the same date to be sure that we have a different governance structure and a better legal basis in five, six, seven years as long as it needs. So let me now turn to the second main topic for today, the signal resolution mechanism. The financial market crisis has shown us the magnitude of the hazards and costs associated with buzzwords such as too big or too complex to fail. The G20 governments have therefore committed to take measures to prevent taxpayers from having to bail out distressed banks. The Honours is now on policy makers and supervisors to develop a resolution and restructuring process. This issue takes a new dimension in the context of joint supervision. After all, within a cross-border supervisory structure there also has to be a common restructuring and resolution regime in order to achieve a balance between liability and control again. To that end we have to establish a central European resolution agency and a joint European resolution fund. That's at least my point of view. I'm convinced about that. In order to make such a single European restructuring and resolution regime lawsuit-proof, a change to primary law is required here too. In my view, the current legal framework for the establishment of a special resolution authority for the euro area with extensive powers of intervention is insufficient. Resolution will invariably be followed by lawsuits. That much is certain. What shape should such a resolution authority take in practice? Transferring the relevant task to the commission limited to only a subset of member states and even just for a transitional period is not a really good idea from my point of view. It harbors legal pitfalls. Restricting the authority's power to the euro area is hardly covered by Article 114 of the EU Treaty. And it also poses the threat of conflicts of interest. Resolution and state aid would be merged into a single authority. As in the context of the SSM in this area too, policy makers are called upon to tackle with determination the task of laying the groundwork under EU primary legislation for an independent resolution authority. Well, what other unfinished business is there? There is above all the issue of instruments and procedures to be applied when a bank is to be resolved or restructured. At all events, the resolution and restructuring of an SSM bank requires common instruments and procedures, which will also benefit EU countries which join the SSM. I therefore welcome the Irish presidency's effort to push ahead with a highly complex and controversial BRD dossier, you know, the directive which is supposed to give for example an idea what kind of packing order you will have in an bail-in. The crucial precondition to finalizing this dossier is agreeing on who will ultimately foot the bill. To this end we need to define the hierarchy of liability clear and ex ante. Shareholders should be the first to be a losses. I think we all can agree to that. And if this doesn't suffice, we must not hesitate to bail in junior and senior debt as well, at least most of the times. The big issue is currently whether or not deposits should be put in a class of their own in the hierarchy of liability, in other words, should there be a depositor preference. Some member states also want all deposits or at least those insured up to 100,000 euro to be exempted from bail-in. A privately financed resolution fund is a further line of defence. All banks supervised directly by the ECB, these are about 140s as we see it now, would have to contribute to this joint European resolution fund which would supersede national regimes in the medium term. This fund should also be able to require additional payments from member banks. Every now and then I hear the notion that the euro system could also make a contribution, for instance, for providing bridge loans. I don't think that this is a good idea. True, a central bank crime provides emergency liquidity. We have the ELA, you all know, as an instrument, but only if a bank is suffering from temporary liquidity shortages. However, it may not, you know, the ECB, the euro system may not and should not contribute, aid towards restructuring or resolution as this can easily cross the line into fiscal policy. As a last resort, however, the fund could request public financial assistance, for example from the ESM, as there could be threats which in extraordinary cases could require recourse to public funding. Public funds is a buzzword and a hot button, button issue. One that is inseparably linked to the question who is the public that is supposed to be doing the funding. Should nation states be called to pay up whenever a crisis occurs? Or should there be a joint European fund? I see no compelling reasons why the cost of bank restructuring should be shifted entirely. And, you know, I'm stressing the word entirely to the European level. You see, the wheel and row of a bank depends not only on the competence of its management, but also on external factors. The quality of supervision, for sure. The financial and economic strength of its boroughs, which in turn hinges on the national nation's economic policy. And also the fiscal policy of the country where a bank is based. Ample proof of this assertion is provided by the fact that the bank's funding costs are dependent on the sovereign credit rating of its home country. We are all, I think, experiencing this the last five years. And today, too. Also, we will be centralizing supervision in Europe next year. Other factors such as economic and fiscal policy will remain largely the responsibility of individual nations. And as long as that is the case, the arguments for shifting losses completely to a European level do not appear to be compelling. I really believe, wouldn't it be better for us to work towards a fair division of burdens between Europe and a nation state? One in which liability would be gradually shifted towards the European level in parallel with the gradual intensification of economic and fiscal policy, of the policy integration. I think that would only be fair, and it would also set the right incentives. The balance sheet assessment provided for by article 27 of the SSM regulation also requires major significance in this context. This article requires the ECB to assess the portfolio quality of the banks it will be supervising in future. What the regulation does not say, however, is what happens if hidden losses are disclosed. I have two things to say about this. I consider the balance sheet assessment to be very important. For it to be successful, we should base our assessments of banks' balance sheets not only on supervisors' judgments. We should also enlist outside specialists, like for example external auditors, for quantitative assessment, not only in order to restore market participants' confidence in the European banking industry, but also to minimize the reputational risk for the ECB. All supervisors in Europe are familiar with these kinds of ad hoc examination. These are precisely the instrument we should be using here. This is the only way, in my point of view, we can avert the suspicion of national supervisors taking too much account of national circumstances. My other remark follows on directly. It concerns the legacy risks of banks supervised under the SSM. As these risks were created in the past under the responsibility of individual member states, they should be born in a national context too. Ladies and gentlemen, I have twice mentioned change to the EU primary law in the context of the banking union, once referring to the SSM and again with regard to the SRM, the single resolution mechanism. I'm indeed aware that many are recoiling at the thought of changing primary law and I know you have special, you know, well, not problems, but a special structure you need to fulfill and you need to meet when changing this primary law. So it is a long, it's a winding road. Ultimately, however, the project of creating a banking union is similar to the creation of the single monetary policy. And we did things properly then and started by establishing a sound legal foundation. If it was good enough for establishing a monetary union, it will be good enough for banking union. That notwithstanding, I think the SSM and the restructuring and resolution mechanism should be launched prior to changing EU primary law. However, we should start working on amendments to primary law right away given the foreseeable difficulties and the amount of times this endeavor will probably take. Ladies and gentlemen, while I'm here with you today, the ECB is visiting my colleagues at the Bundesbank. I was planning to go there too, but I thought I need to be with you here. So they are there with my colleagues at the Bundesbank to put on a roadshow, extolling its virtues as an employer. As good as Faust put it, two souls alas are dwelling in my breast. As much as I look forward to a single supervisory mechanism to the success of which many of my fellow Bundesbanker will be instrumental as every supervisor in the Euro area will be instrumental. I will be very, very sorry to have to do without them at the Bundesbank. The SSM, after all, is designed in such a manner that the quality and expertise of national supervisors will continue to be the decisive factor. This constituent, I always have a problem with that word, of the EU, the principle of subsidiarity will have a place in the banking union too. Nonetheless, themes relating to banks and their supervision and resolution will acquire a new European dimension. And as long as this is done well, this is, it should be. Okay, thank you very much.