Check against delivery.

Ladies and gentlemen, Claudia and Sabine,

I would like to welcome you to our conference celebrating the anniversary of the Single Supervisory Mechanism (SSM).

When the SSM was established ten years ago, it probably wasn’t greeted with unanimous enthusiasm at all of the eurozone's national supervisory authorities. In particular, the ambitious timetable for founding the common European supervisory system drew quite a bit of scepticism.

I was still working at Switzerland’s supervisory authority at the time, and I viewed the SSM above all as a great step forward: with the ECB we would finally have a single credible counterpart for all significant institutions in the eurozone. Especially for supervisors in third countries, this was a big step forward.

What was my prediction ten years ago? I expected two developments: that European supervision would overall become more professional. And that it would also become more expensive. The national supervisory authorities handed over direct responsibility for major banks to the ECB. Nevertheless, even from my outside perspective it seemed clear that they would not downsize. I’ll say more on the topic of efficiency later.

Allow me to first take a look back: why was there such great pressure at the time to establish the SSM so quickly? Has it lived up to the potential envisioned by its founders? And I’d also like to look at our path forward: in which areas can we improve? The SSM is a success story. But what do we need to change to ensure that it remains a success story ten years from now and beyond?

The financial crisis and subsequent sovereign debt crisis sowed rampant distrust towards banks in several EU countries. There were multiple reasons for this.

The individual EU member states had different supervisory approaches. As a result, risks were assessed and handled differently from country to country. It was hardly possible, from the outside, to evaluate the true state of some banks in the eurozone.

Not even supervisors in other member states could get a clear impression. There was only limited exchange of information between the national supervisory authorities. Collaboration was not always easy – we need only look back at the extremely arduous break-up and rescue of Fortis Group, involving the supervisory authorities and governments of three countries.

As a supervisor from outside the EU, it was sometimes difficult even in crisis situations to get in touch with colleagues at a partner authority. Trust-based cooperation was not always possible. It was precisely this lack of trust and credibility that led to the partially uncoordinated supervisory response to the European debt crisis. Ringfencing was the order of the day, not cooperation. And ringfencing during a crisis weakens the entire system.

It was therefore necessary to build a single European banking supervisor within the shortest time possible. And that’s when the work began. The new authority would not only need office premises and staff, but also answers to a number of basic policy questions: which banks should be supervised and how? What standards should be applied? What data would be required?

Sabine Lautenschläger, who will speak after me, experienced this tumultuous phase first-hand. She will share a few interesting details from that time.

Ten years later, I think it’s safe to say: the enormous effort was worth it. We have achieved our key objectives. Thanks to the SSM, banks have become more secure and more stable.

The SSM has created a level playing field for banks. Large banks across the eurozone are all subject to the same supervisory standards no matter their home country. National discretion is out. Indeed, regulatory convergence alone wasn’t sufficient. We need supervisory convergence as well. The same risks must be handled the same.

This prevents supervisory arbitrage and ensures fairer competition. If supervisory arbitrage is possible, it will be exploited – always to the detriment of financial stability or consumers.

Centralisation is just one option for achieving supervisory convergence. It is not necessarily the best approach for all parts of the financial market. But for the supervision of large, systemically important banks, centralisation was and is absolutely the right decision. Look at the work in the joint supervisory teams (JSTs).

Assessing supervised institutions together fosters discipline and results in better outcomes. National interests are secondary.

Another achievement of the SSM is that it is now possible for supervisors to share and analyse sensitive national data and information across international borders. This enables a holistic perspective.

We are also better able to assess risks today. Reliable cross-comparisons between large European banks are possible at an entirely new level. Before the SSM, we could only compare national champions to a small number of other domestic institutions, or none at all. That is not the case anymore. We can now compare Deutsche Bank with major banks in France, for example.

Is the SSM perfect today?

No. Firstly, we cannot afford to grow complacent. Our self-image is very positive – too positive, perhaps? It is true we have grown more effective, and our credibility with colleagues in other countries has likewise grown. But we have not encountered any truly major crisis in our financial system over the past ten years. That test is still to come.

There’s another point I consider crucial: we have to increase our efficiency. In other words, we need to streamline processes and reduce the level of detail.

Last year’s report from the Wise Persons Group grappled with the question of where the SSM still has room to improve. The verdict was clear: processes within the SSM are too cumbersome.

How did this happen? Processes were heavily standardised in the SSM to create a level playing field. But now we have achieved that level playing field. Too rigid processes slow down the system and place too many constraints on supervisory teams. We should place even more trust in the supervisory teams.

The SSM should become quicker and more focussed. The core Supervisory Review and Evaluation Process (SREP) produces findings on banks more than a year after the balance sheet date. The letters involved are often over 50 pages long. Audit reports are often hundreds of pages long. The danger is that not the addressees in senior management read them, but their staff.

Good supervision means concentrating on what really matters in order to then persistently and resolutely demand improvement. Supervision shouldn’t be a game of attrition – it should be swift, precise and bold. And that also means having the courage to be more concise, clear and focussed.

We have already introduced the Risk Tolerance Framework (RTF), which makes European banking supervision significantly more flexible. Supervisors can now concentrate more on the most risk-relevant areas for each individual institution.

We need to continue along this course, and we at BaFin are working to make that happen. We will continue to advocate for less rigidity, more speed and a sharper focus in the SSM. This is the path to ensuring we will once again be able to celebrate the SSM as a success story at the 20th anniversary event in 2034