This will ensure that our accommodative monetary policy stance will contribute to a gradual recovery and a return of inflation rates in the medium term to levels closer to our aim of below but close to 2%. Nonetheless, we need to remain alert to possible downside risks to our outlook for inflation, in particular against the background of a weakening growth momentum and continued subdued monetary and credit dynamics. We therefore need to closely monitor and continuously assess the appropriateness of our monetary policy stance. If necessary to further address risks of too prolonged a period of low inflation, the Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate. In this context, we have also tasked relevant ECB staff and Eurosystem committees with the timely preparation of further measures to be implemented, if needed. Such measures could include further changes to the size and composition of the Eurosystem balance sheet, if warranted to achieve price stability over the medium term. Monetary policy alone – however – cannot overcome financial fragmentation in the euro area. Fragmentation across national borders also reflects underlying national imbalances and institutional deficiencies. Overcoming these require determined structural reforms on the side of national governments to improve the business environment and setting incentives to invest, with the aim to boost productivity, create new jobs and raise the growth potential of the economy. Reducing financial fragmentation also requires tackling remaining shortcomings in economic and financial integration. As already mentioned, substantial progress has been made this year.

6  All speeches are available online at www.bankofengland.co.uk/speeches  6  To put greater emphasis on individual accountability, the UK has introduced new compensation rules that go much further than other jurisdictions in aligning risk and reward. And we have put greater stress on the importance of better governance and firm culture. At the heart of these efforts are new codes of conduct developed by the market for the market, including those of the UK-based FICC Market Standards Board and the new global code for FX markets. 10  Since codes are of little use if no one reads, follows or enforces them, the UK has instituted a unique Senior Managers Regime to embed cultures of risk awareness, openness and ethical behaviour. Based on its early successes, international authorities are now considering following the UK’s lead. IV. Effective Supervisory Cooperation and Coordination is Essential  Better regulation is not enough. To build responsible financial globalisation, international authorities must also share relevant information and work together to manage cross border challenges to financial stability. There are three critical elements to international regulatory cooperation. First, we need common minimum standards and consistent implementation. While regulations need not be exactly the same, they should deliver similar outcomes. This is now possible given progress at the FSB, where a series of agreed reforms are levelling the playing field and reducing opportunities for regulatory arbitrage. The UK is implementing its rules consistently, fairly and transparently. For example, the PRA’s regulatory standards are the same for domestic and international banks.