integration of wholesale activities in the euro area, in general, and the market for unsecured interbank deposits, in particular. first, the smooth functioning of the settlement of cross - border payments, mainly performed via the target system, allows banks to trade safely throughout the euro area. second, the swift acceptance of euro area indices such as eonia and euribor forms a common basis for pricing. experience with target demonstrates the importance of the market infrastructure in allowing arbitrage to operate effectively. let me now turn from wholesale activities to banks ’ customer business. as european banks are typically universal banks, they combine a wide range of products within a single institution. the markets for these products have varying degrees of integration - some are already global or european, while others have remained national or even local in character. at least the major banks already operate in highly internationalised markets for a number of their products and have geographically diversified activities. even if banks remain nationally based, they are increasingly subject to international market developments. national tendencies are increasingly influenced by international developments. hence, the usual argument that cross - border mergers and acquisitions are a necessary condition in order to achieve a more integrated and international banking system does not seem very strong. in particular, many of the asset management and investment banking services are already quite internationalised as the capital markets have taken significant steps towards integration and growth following the introduction of the euro. banks ’ own holdings of securities have also become increasingly diversified across borders. the trend has been quite strong for government securities, as well as for corporate bonds. to take an example of the financial services provided by banks in the capital market area, the leading underwriters of bonds issued by european firms are the major european banks, alongside the largest us investment banks. the “ league ” in which these players compete is clearly not a domestic one. another example, which is particularly telling of integration, can be drawn from the rapidly expanding new european equity markets for technology and growth companies. underwriting the initial public offerings or ipos of this type of firm is the kind of service where we should expect the greatest degree of national segmentation, since the companies are usually accessing the capital market for the first time, possibly as captive customers of local banks. however, experience so far shows that, in most cases, a foreign institution was present alongside a domestic one. by contrast with the services provided to other financial institutions and large corporations, retail activities for personal customers and small and medium - sized firms are still confined

not been fully learned, means there are still obstacles to cross - border banking. in europe, we have gone one step further in ensuring that banks in the euro area are supervised according to one approach – an essential part of the response to the crisis was to create a single supervisor for the euro area. the single rulebook forms the basis for this supervision. but this rulebook is not as single as supervisors would like. there are still some important areas in urgent need of harmonisation, not only to ensure a level playing field, but also to promote cross - border banking. 1 / 2 bis central bankers'speeches i will mention just a few : fit and proper rules are not harmonised at all. many crisis - related supervisory competences are not harmonised. there are still some options and national discretions open to member states, which means banks can be treated differently for reasons other than the underlying risks. we see that cross - border banking has recovered elsewhere but not in europe. european banks still lag behind in this respect. in part, this is also due to ring fencing, which limits banks ’ ability to freely move liquidity and capital within groups in europe. i understand that taking the first step in eliminating ring - fencing is daunting. host country supervisors fear being left to foot the bill of costly crises. for small economies, or large economies with a large number of foreign banks, this is a challenge. but it is a challenge we need to find a common solution to. and we need to find this solution before the next crisis hits. 2 / 2 bis central bankers'speeches