does not embody a claim of its holders against the libra association. if libra were to be treated as a transferable security or a different type of financial instrument, both the libra association and any other entities engaged in providing investment services through libra coins would fall within the remit of the markets in financial instruments directive ( mifid ii ). alternatively, if libra were to qualify as a virtual currency then, under the fourth anti - money laundering directive, both calibra and its authorised resellers would become subject to the directive ’ s anti - money laundering and counter - terrorism financing obligations, and to its registration requirement. given the different regulatory implications of libra ’ s legal 2 / 4 bis central bankers'speeches characterisation, regulatory intervention is essential, to either confirm libra ’ s classification under one of the existing legal and regulatory frameworks, or to create a dedicated regime adjusted to its specificities. a second challenge is to ensure that the relevant eu and member state regulatory and supervisory authorities can assert jurisdiction over libra and its network. but how can this be done when the entities behind libra are located outside the eu? one way would be to require national custody of a share of the libra reserve funds equivalent to the amount of libra in circulation in any given eu member state. but there may be other ways to ensure effective public control over libra and its network, and these are worth exploring. ensuring that payment systems are safe and accessible and exercising control over the financial market infrastructures that underpin our economies will remain public good objectives. and the conditions under which collateral or settlement finality are accepted will remain prerogatives of the regulatory or legislative authorities. the third challenge is the need for cross - border cooperation and coordination. because libra will be used across borders, it is a matter of international interest. its global nature would also call for a global regulatory and supervisory response to avoid regulatory arbitrage, ensure consistency of outcomes and guarantee the efficiency of public policy responses to libra. there are welcome signs that the global community is already working together to mitigate libra ’ s risks. both the g7 and the committee on payments and market infrastructures have evaluated libra, with an emphasis on its potential use in money laundering and terrorist financing. further work is expected by the g20, the financial stability board and other fora with a stake in the stability of the global monetary and financial system. finally, i would like

##ncies. banks are not fully benefiting from economies of scale and are relying on overlapping physical distribution networks. as a result, their cost - toincome ratios – currently at 66 % – are high when compared with those of their peers in the united states and the nordic countries. so, how can euro area banks return to sustainable profitability? and how can they make more decisive progress in tackling structural challenges and cost inefficiencies? let me mention two avenues which would support an increase in bank profitability. first, there is room for banks to adjust their business models. in fact, ecb analysis has found that the best performing banks have diversified their income sources, improved their cost efficiency and invested in digital technologies to a greater extent than their peers. 1 second, consolidation via mergers and acquisitions may allow banks to exploit economies of 1 / 3 bis central bankers'speeches scale and scope, which should bring about improved performance. cross - border mergers, while less likely to produce cost savings or economies of scale, would have an additional benefit of improved risk diversification and would thus result in more resilient profitability. to this end, policy - makers may need to remove obstacles to cross - border mergers and acquisitions, promote further integration and pursue the banking union agenda. it is also worth recalling the good news. banks have noticeably improved their resilience over the past few years. this largely reflects the new regulatory framework. they now need to hold more and higher - quality regulatory capital and they must maintain liquidity buffers. they also need to finance themselves through stable funding sources. and they have to plan for their potential resolution and issue debt instruments that can be bailed in. while these adjustments can be challenging in the short term, in the long term they increase the banking sector ’ s resilience to adverse shocks, reducing the likelihood of costly financial crises. in fact, the euro area banking system already complies with the new requirements for high - quality capital and liquidity buffers. but even though banks have improved their capital positions in recent years, only a small fraction of bank capital requirements are in the form of the countercyclical capital buffer ( ccyb ), which authorities can release in the event of systemic stress to help avoid costly economic deleveraging. this suggests that the current composition of capital requirements may need to be rebalanced to give the ccyb a more prominent role. opportunities and challenges for euro area non - bank financial