However, substantial cross-country differences persist in this area, with unemployment levels ranging from below 4% in Germany to 20% in Greece. The favourable financing conditions associated with the extraordinary monetary policy measures implemented by the Eurosystem have no doubt been one of the essential determinants behind the economic recovery transforming into a vigorous expansion. To illustrate this, the estimates made by the Banco de España suggest that the monetary policy measures contribute to accounting for practically half the euro area economy’s observed nominal growth since mid-2014. Adding to this is the greater buoyancy of world trade, which recouped growth rates not observed in the five previous years. This result reflects the favourable cyclical juncture at which many advanced and emerging economies now stand, but also a true recovery in the sensitivity of trade to global growth, despite the protectionist threats that have emerged and that may put a brake on this fundamental engine for economies as open as the European ones are. The strength of exports has contributed notably to sustaining the greater buoyancy of the aforementioned investment. Another factor contributing to the expansion has been the headway in the ongoing deleveraging that households and firms have had to undertake. Currently, in the area as a whole, household and corporate debt is drawing closer to observed pre-crisis levels, with a greater correction in the more vulnerable countries being discernible. Fiscal policy, too, retains at present a more neutral stance, following the public finances consolidation process pursued.

Whether we are talking about your cash or your securities, if you can call them on demand and they are being used to finance your broker’s business, that used to be called ..... banking. I suggest the following in this area:   Only banks should be able to use client moneys and unencumbered assets to finance their own business to a material extent; and that should be a clear principal relationship. Legal form should come into line with economic substance.   For non-banks, any client moneys and unencumbered assets should be segregated and should not be used to finance the business to a material extent. It should, however, remain permissible for non-banks to lend to such clients on a collateralised basis to finance their holdings of securities (“margin lending”). This is an area where regimes vary enormously around the world or are non-existent. For example, the US domestic regime is stricter on this than Europe. We need a global discussion. Securities lending, repo and collateralised-financing markets So far I have discussed funds or vehicles or firms that are in economic substance shadow banks. We also need to think about the markets that firms and vehicles can use to develop a de facto banking business. Perhaps the key such markets are securities lending and repo – or, more generally, collateralised borrowing. Before proceeding I must stress that these markets are vital to efficient capital markets. The crucial economic function of market-making entails intermediaries going short, and so needing to cover their position by borrowing securities.