That said, the studies that do exist tentatively support the conclusion that macro-prudential policy can be effective in the euro area. Assetside measures like LTV, LTI and DTI in particular have been found to be effective in dampening real estate booms. 10 As this was the sector at the heart of the crisis in several euro area countries, this is encouraging. Further research in this area is essential to help us better understand the impact and transmission channels of macro-prudential policies. Questions of effectiveness aside, where the SSM represents a major step forward in macroprudential policy, is in creating some centralisation of macro-prudential decision-making. The SSM Regulation gives the ECB the power to apply stricter macro-prudential measures than national authorities if it deems necessary. This allows us to take an integrated view of macroprudential policy – spillovers, arbitrage effects – and provides a safeguard against inaction bias at the national level. Moreover, the important role of the ECB Governing Council in macro-prudential decisionmaking allows for interactions between monetary policy and macro-prudential policy to be internalised and synergies to be exploited. To give just one example, several of the nonstandard measures we have adopted during the crisis, such as changes in collateral haircuts or reserve requirements, might in certain cases overlap with macro-prudential measures like liquidity ratios and margin requirements. This suggests that macro-prudential policies can support us in fulfilling our mandate. Conclusion Let me conclude. Since the launch of the euro, we have become more interconnected.

This is ultimately the objective of the next phase of banking union: building a single European supervisor via the Single Supervisory Mechanism (SSM). There are four ways in particular I expect the SSM to make a difference to banking in Europe: by improving the quality of supervision; by creating a more homogenous application of rules and standards; by improving incentives for deeper banking integration; and by strengthening the application of macro-prudential policies. The SSM should create the conditions and incentives for deeper integration of the European banking market, which should in turn make the euro area less vulnerable to fragmentation. Barriers that existed in the past to deeper retail banking integration, for example opaque supervisory approval procedures, will no longer be relevant with a single European supervisor. The substantial compliance costs that came from having to observe different sets of rules and interact with several different authorities should also be reduced. At the same time, the benefits of cross-border integration should increase. Cross-border banking groups will be able to optimise their internal management of capital and liquidity. Further efforts to reduce fragmentation and a drive to achieve genuine banking integration can help Europe exit the crisis in at least three ways. First, more integrated banking markets intensify competition: banks, as well as other financial market participants, will have to change their strategies. More competition means that capital is allocated more efficiently. This promotes access to new funding opportunities for companies, encourages investment and thus contributes to higher economic growth.