generates major economies of scale, and thus encourages concentration. but greater competition is absolutely necessary to stimulate financial innovation. in addition, it translates in a market structure that is more attractive from a financial stability perspective and easier to oversee from a supervisory standpoint. so, to conclude my second point, the completion of the regulatory decade to strengthen banking financial intermediation is not the end of the story ; it ’ s just the end of the beginning. the transformation of financial intermediation is full of opportunities but it also highlights the limitations of sectoral and entity - based regulations and the need to adapt regulation and supervision to a morphing financial intermediation. to manage the financial stability risks stemming from an unbundled financial intermediation model, what we need is to develop : - first, well - articulated and complementary regulation and supervision going from microprudential to macro - prudential, from prudential to consumer protection, anti - money laundering, data protection and anti - trust laws ; - secondly, a technology - neutral stance, which accommodates fintech innovation while preserving financial stability ; and - thirdly, an activity - based regulation and supervision, to ensure a level playing field between all entities pursuing the same financial activity. 3 - the need to advance the european regulatory agenda to support a more diversified and integrated intermediation model all these new trends in financial intermediation – digitalisation, non - bank financial intermediation, brexit – plead for advancing the european agenda to support a more diversified and integrated intermediation model. at the same time, these changes represent an incredible opportunity to restructure the european financial system in order to unleash growth and innovation. 7 / 9 steps towards a more integrated financial system at european level have already been taken since the crisis, with the banking union and the capital markets union projects. these projects need to be further developed and implemented. the banking union, which was set up to put an end to the link between sovereign risk and banking risk, is now operational. what remains to be done in order to finalise it includes completing the resolution pillar by implementing a backstop and adopting a common framework to enhance the provision of liquidity and putting in place a european deposit insurance scheme. finalising the banking union is of prime importance for the development of pan - european banks, and will make it possible to achieve a better balance of risks, economies of scale, a better allocation of savings towards productive investments and increased competitive

be able to both meet those requirements and distribute profits. conversely, capital dries up during downturns, when it is most necessary 9. there is clearly an asymmetry with strong equity outflows in boom times and no inflows in bad times. it is not clear that introducing counter cyclical capital requirements will suffice to counteract this very powerful dynamic, especially in bad times. it may be necessary to look at other tools in order to address procyclicality and pre - empt the build up of imbalances. those tools have to act more directly on individual and collective incentives. this is where accounting may matter most. economically, it will always remain difficult, when looking at revenues drawn from a financial investment, to distinguish excess return from additional risk taking. but financial reporting may be conceived in such a way that this distinction is prudently introduced. there is no reasonable or practical alternative to fair value accounting for tradable securities. this does not mean, however, that any single valuation gain or loss should instantly be recognized as a profit ( or loss ) and financially treated as such. there is a possibility to delink valuation from income / profit recognition. some disconnection between the valuation process – which should remain anchored on market prices – and income and profit recognition will have to be introduced, if only to account for risks which are there but have not yet materialized. dynamic provisioning is one technique for doing so, when risks are closely related to the economic cycle. valuation reserves may also be used when complexity or illiquidity creates additional risk linked to valuation. provided those adjustments are rule based and made in a fully transparent process, they would not reduce the quantity or quality of information available to investors as to the real health of financial institutions. another avenue for research would be for the regulatory system to " force " the pricing of risk in all its dimensions. there is a clear analogy with tax theory : internalizing the risk eliminates market failures. this approach would be best implemented to liquidity risk linked to maturity transformation. quantitative liquidity ratios are currently considered in a number of juridictions to be imposed on financial institutions. however, they may not protect the system against an aggregate liquidity shock, when, by definition, the demand for liquidity becomes infinite and any buffer proves insufficient. pricing liquidity ex ante in the system would reduce the probability of such a shock and create incentives against relying too much on maturity transformation.