With the European Stability Mechanism (ESM) introduced in October 2012, they have established a powerful crisis management mechanism for the euro area. With its effective lending capacity of EUR 500 billion, this backstop gives euro area countries in distress time to implement measures to restore fiscal sustainability, competitiveness and financial stability in the medium term. Besides the ESM, the Banking Union is a major progress towards further European financial integration and therefore a more performant currency union. It is now operational, based on two pillars. The first one, since end 2014, is the Single Supervisory Mechanism. It gives the ECB the responsibility, in cooperation with the national supervisors, to oversee banking supervision in the euro area, and ensure the consistent application of regulations across the region. The second pillar, since January 2016: the Single Resolution Mechanism. It ensures that banks across the euro area can be resolved according to the same rules and with minimal costs for taxpayers and to the real economy. Yet, we also have to look at what is still to be done. Further important steps for the Banking Union are under discussion, with a priority to completing an efficient resolution pillar. Moreover, there 4/6  BIS central bankers' speeches  are still some issues with certain banks, in particular regarding non-performing loans in Italy and Portugal. These are manageable but now need to be addressed seriously and quickly. That said, we should not judge the European financial sector only on the basis of its difficult cases, or those “trailing at the rear”.

Today, the euro accounts for 20% of international reserves, second only to the dollar. An internationally recognised currency generates economic gains: financial markets are more attractive to domestic and foreign investors, more liquid, and thus more efficient. But it also carries a political weight: when Mario Draghi speaks at the G20, the whole world listens to Europe attentively, just as when Janet 2/6  BIS central bankers' speeches  Yellen speaks for the United States. Overall, this list of benefits is impressive, particularly when you think that the euro is only 18 years old. More importantly, we have come this far despite the global financial crisis, which triggered the deepest recession in three generations, and despite the euro area sovereign debt crisis a few years later. 2. Let me now turn to monetary policy: the euro has passed the stress test of the crises. a. Monetary policy Successful crisis management The Eurosystem has deployed an innovative and resolute monetary policy strategy, which has helped stabilise the euro area economy and reduce the costs of crises. Let me briefly recall what we have done [slide]. We had first to face, like you, the consequences of the collapse of Lehman Brothers. Like many other central banks, we reacted promptly by offering unlimited liquidity to financial intermediaries, sharply lowering our main refinancing rate and providing international swap lines. Yet, this was only our first challenge. The Lehman episode paved the way for the euro area sovereign debt crisis and its amplification through the “bank-sovereign” nexus.