3  For a description by the Bank of England of how quantitative easing works, see http://www.bankofengland.co.uk/monetarypolicy/Pages/qe/default.aspx. For a description by the Federal Reserve, see for example speech by Ben Bernanke, 31 August 2012, http://www.federalreserve. gov/newsevents/speech/bernanke20120831a.htm. For a theoretical description of the effects, see Michael Woodford (2012): “Methods of Policy Accommodation at the Interest-Rate Lower Bound”, http://kansascityfed.org/publicat/sympos/2012/mw.pdf?sm=jh083112-4 . See also Economic Commentaries 1/2011: “Om nye virkemidler i pengepolitikken. Avgrensning mellom pengepolitikken og finanspolitikken” (New monetary policy instruments. Delimitation between monetary policy and fiscal policy), Ragna Alstadheim (Norwegian only). 4  Classic references are James Tobin (1965): “The Monetary Interpretation of History”, American Economic Review, Vol 55, pp. 464–85 and (1969): “A General Equilibrium Approach to Monetary Theory”, Journal of Money, Credit and Banking, Vol 1 (February), pp. 15–29. For a more modern presentation, see Javier Andres, David Lopez-Salido and Edward Nelson (2004): “Tobin’s imperfect Asset Substitution in Optimizing General Equilibrium”, Journal of Money, Credit and Banking, Vol 36 (August), pp. 665–90. 5  See for example Arvind Krishnamurthy and Annette Vissing-Jørgensen (2011): “The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy”, Brookings Papers on Economic Activity, Fall, pp 215–65 and Jonathan Wright (2012): “What does Monetary Policy Do to Long-Term Interest Rates at the Zero Lower Bound?”, NBER Working Paper Series 17154. 2  BIS central bankers’ speeches  When a central bank purchases government bonds, it pays for the bonds with new electronic money.

While the initial ambition was to create a unified area where European banks could operate efficiently, we are still struggling with intra-European borders. The European banking sector remains far too fragmented. In 2019, the market share of the top five US banks was 43% [of domestic consolidated assets], compared with only 23% for the top five in Europe. There are still too many roadblocks to cross-border restructuring: geographical ring-fencing practices prevent groups from managing liquidity and capital efficiently on a consolidated basis. As a result, fewer than ten cross-border M&A deals have been signed since 2014, compared with 180 domestic deals over the same period, a historic low: at present, Banking Union has meant that our banks are actually not more Pan-European. This paradox is intolerable. Why it remains crucial. The creation of the Banking Union itself was a direct response to the sovereign debt crisis in Europe and its impact on the bank-sovereign nexus in a context of fragmented supervision. Beyond the need to mitigate any future crisis, the achievement of the Banking Union remains of the utmost importance, for both micro and macro reasons. At the micro level, moving further towards a true single banking market through cross-border restructuring is a matter of strategic autonomy. Genuine Pan-European banking groups could operate more effectively, raise their profitability thanks to scale effects and better face up to foreign competition, especially from the United States.