in investors ’ approach. empirical evidence suggests indeed that sector - related factors are playing an increasing role in price dynamics. as integration enlarges the range of potential investors, it also fosters the development of private equity and the financing of young and innovative firms, a trend that is obviously welcomed. 1. 4 behind the scene, supporting the evolutions that i just touched upon, market infrastructures have undergone radical changes. as an example, as regards trading infrastructures, the creation and expansion of euronext is a striking illustration of the on - going consolidation process : the euronext group now links the french, belgian, dutch and portuguese stock markets, and has concluded co - operation agreements with several other european markets. the group also significantly increased its presence on interest rates derivatives markets. this ongoing movement of consolidation affects securities clearing, settlement and depository infrastructures, as providers aim to propose an integrated transaction service covering the entire securities processing cycle. in the field of post - market infrastructures, clearnet is pursuing its pan - european expansion by completing its operational integration throughout the euronext area. the clearing house also reached an agreement with its italian counterpart, enabling it to offer central counterparty services for transactions executed on the italian government securities market. a similar consolidation process is taking place in the central securities depositaries ( csd ) area, paving the way for a more efficient functioning of delivery versus payment ( dvp ) procedures, and easier and safer settlement of cross - border securities transactions. this latter aspect is of particular interest for the eurosystem, as a smooth functioning of securities settlement infrastructures is key for an efficient implementation of monetary policy. structural changes, such as the setting up of euroclear ’ s single settlement engine, are of great interest in that regard : the so called single settlement engine ( sse ) by 2005 will enable participants to settle securities transactions on a delivery - versus - payment basis between the group ’ s different depositories, more effectively than today and at a lower cost, without changing their interface or procedure. moreover, the central banks of the five countries concerned are discussing mechanisms that would allow euroclear participants to settle all their transactions in central bank money and on a real - time gross settlement basis with the central bank of their choice. 1. 5 all these developments highlight the necessity to harmonise operational practices, to define common standards and to adopt new procedures for co - operation between supervisory authorities. to function properly, markets require a well designed legal

and regulatory infrastructure. since the institutional reforms advocated by the lamfalussy report were set in train in 2001, european integration has made significant headway. let me emphasise how the lamfalussy works were of utmost interest and greatly efficient. indeed, the “ lamfalussy ” process has proved to be effective with a readjustment of the content of the texts between the legislative and regulatory levels and a shortening of the timeframe for the adoption of directives. the four - level regulatory approach of the lamfalussy procedure is now fully operational, with the two bodies in charge of “ comitology ” - the european securities committee ( esc ) and the committee of european securities regulators ( cesr ) - working on the preparation of measures to implement directives, sometimes in parallel with the political negotiations. as i have mentioned it earlier, the financial services action plan ( fsap ) has endowed europe with a coherent and market responsive regulatory framework. up to now, 34 out of the 42 initially proposed measures have already been finalised, and i would like to remind you how impressive were the progress made in implementing the financial services action plan over the last six months : in addition to the directive on market abuse, adopted in january 2003, the directive updating the accounting provisions of the fourth and seventh company law directives and the directive on pension funds were adopted at the beginning of may 2003. moreover, in february 2003, the european council and parliament agreed on a common position on the draft directive on prospectuses, which is expected to be adopted during the course of the year, as will probably be also the directive on taxation of savings income and even the new directive on take over bids. the majority of the key measures relating to securities market in the action plan are expected to be adopted before the end of this year or the spring 2004. discussions and consultations continued in several crucial areas such as the overhaul of the investment services directive - a cornerstone of the fsap and a key area in terms of european financial integration and investors protection, post trading activities ( clearing and settlement ), the review of the capital requirements that apply to financial institutions and a framework for the supervision of the reinsurance sector. 2. financial integration is an ongoing process with renewed challenges in a constantly changing environment we can easily measure the significant progress that have already been made in terms of financial integration. however, and this is the second topic i wanted to touch upon, in a constantly changing environment,