Participating will also have the added advantage to have first-hand knowledge of the decisions made in this context and thus avoid having partial and/or distorted information communicated by parent banks in accordance with group-level agendas. The second argument relies on the fact that, in many of the non-euro area new Member States, the domestic banking systems are dominated by banks headquartered in the euro area – in the case of Romania, for example, euro area banks account for 80 percent of the banking system’s assets; the same is true for the Czech Republic and Hungary (where foreign-controlled banks hold above 80 percent of total assets) and to a lesser – though still significant – extent in Bulgaria and Poland (around 70 and 60 percent respectively). Subsidiaries and branches of these banks are often important enough so that they are deemed systemic at the host country level, even though their balance sheets are small relative to their parent entities. Non-euro countries are therefore already well integrated into the European financial market. Clearly, the objective of preserving the integrity and ensuring the smooth functioning of the European financial market is not something that concerns only the euro area, but is relevant at the EU level. In this context, it is hardly surprising that Romania embraced the Banking Union idea – it makes perfect sense that the reality of a significant, even systemic, cross-border presence in the banking systems of non-euro area countries is matched by effective cross-border supervisory and regulatory institutions.

Due to the appreciation of the Swiss franc, export-geared companies are exposed to strong price competition. In manufacturing, in particular, margins are under very strong pressure in some cases. However, survey results still suggest that robust foreign demand allows for good utilisation of capacities and supports exports. The short-term outlook also remains good for domestic demand. Construction investment is benefiting from favourable financing conditions, while higher capacity utilisation should stimulate equipment investment. Demand for labour is likely to firm further. For 2011, the SNB is maintaining its forecast of real GDP growth amounting to around 2%. Monetary and financial conditions Monetary conditions were again characterised by the divergence between low interest rates and the Swiss franc, which appreciated significantly in the second quarter. Since the last monetary policy assessment, the three-month Libor has persisted in the lower part of the target range. With inflation expectations rising slightly, real interest rates have remained low and even, in the short-term range, negative. In general, although long-term interest rates have risen since their low point in August 2010, they are still at a low level. By contrast, the real export-weighted Swiss franc appreciated further in the second quarter and has reached an all-time high. By the beginning of May, the US dollar – mainly – had weakened significantly against the Swiss franc. Thereafter, renewed concerns about stability in the euro area also led to a depreciation of the euro. My colleague, Jean-Pierre Danthine, will speak about the situation on the international financial markets in more detail later on.