Promisingly, green bonds are roughly twice as likely as other European bonds to be held cross-border[8], and investments in environmental, social and governance funds appear to be more stable than those in conventional funds. [9] This incipient evidence suggests that, with the right regulatory framework in place, scaling up green finance will be beneficial in supporting both the low-carbon transition and financial integration in the euro area. Third, the capital markets union and the banking union are intrinsically linked. More integrated capital markets support cross-border banking activities, while more cross-border holdings would allow banks to diversify, making them more resilient. From issuance to underwriting, banks provide essential services for capital markets. Therefore, a more resilient and integrated banking system also supports the smooth functioning and further integration of capital markets. Key legislative initiatives to advance capital markets integration To move forward on the legislative front, we need to finalise the implementation of the Commission’s capital markets union action plan – without compromising on its ambition. This includes implementing proposals such as the consolidated tape, the targeted harmonisation of insolvency rules and the upcoming initiative on the withholding tax framework. We welcome the recent statement made by the co-legislators in April, in which they committed to finalising CMU legislative initiatives during the current institutional cycle, and the recent agreement on the European Single Access Point. The ESAP will help to mobilise and allocate capital by making it easier for investors to identify suitable firms and projects to invest in.

The role of central banks after the crisis From a central bank’s perspective three lessons can be drawn that appear to be crucial for its future role in crisis prevention and resolution. First, in a financially integrated market like the euro area, contagion risks are large with financial instability rapidly spreading to other market segments. Second, the sudden materialisation of financial instabilities can lead to strong recessionary forces that carry downside risks for medium-term price stability. This has taught policy makers that “cleaning” rather than “leaning” against financial imbalances can simply become a very costly strategy. And third, a stable macroeconomic environment with stable prices – though being a necessary condition – is not a sufficient one for the preservation of financial stability. Neither the implemented “ex-ante” policy measures by national authorities nor those by central banks were enough to deal with the build-up of risks and imbalances that led to the current crisis. So, what does this imply for the future role of central banks as stability guardians and their role as crisis managers? The future role of central banks: financial stability and supervision The importance of financial stability for central banks has been acknowledged in the European Treaty. Article 127/5 reads: “The ESCB shall contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system”.