to authentication controls, since this area may also be particularly susceptible to external fraud. loan administration is another area where banking organizations could suffer significant financial losses from inappropriate segregation of duties or lack of dual controls. an institution could also incur considerable damage to its reputation if operational risk factors are not properly mitigated. a few recurring recommendations from these types of reviews that may be applied to corporations more generally are to ( 1 ) ensure that loan officers do not have the ability to book and maintain their own loans ; ( 2 ) confine employee access to only those loan system computer applications that are consistent with their responsibilities ; and ( 3 ) provide line staff with consistent guidance, in the form of policies and procedures, on how to identify and handle unusual transactions. mortgage lending effectively managing the risk of a mortgage portfolio involves much more than prudent underwriting. experienced risk managers should understand the need to temper their enthusiasm during boom times by considering carefully the accompanying risks. these risks include the possibility that expectations for future income growth for marginal borrowers may be optimistic. in addition, there could be an accumulation of outsized portfolio concentrations that leave the institution exposed to a downturn in that sector. and the need to consider these risks is most pronounced when competition among lenders for market share is most intense. during the recent housing boom, faced with soaring home prices and rising interest rates, many borrowers have sought to lower their debt service obligations by turning to mortgages with nonstandard payment and amortization schedules. much of the new loans extended in the past two years have been nontraditional mortgages, including adjustable - rate mortgages with teaser rates and negative amortization features. at the same time, some banks have weakened proof of income and appraisal standards, and did not fully assess borrowers'ability to pay when interest rates rise and full amortization begins. in addition, a fair share of the recent lending with nontraditional products has been in the subprime market. net housing wealth ( as a multiple of income ) also jumped over the same period. to some extent this increase is a source of comfort, providing larger collateral cushions to lenders. and a solid base of household housing wealth has been important to household confidence and influenced their appetite for consumption spending. but we know from experience the risks of extending credit with too much emphasis on collateral values. a borrower's equity in his or her home matters most when a property is foreclosed, something that both

a succession of threats and crises. this was certainly the case in both the examples i just mentioned, which produced landmark institutional reforms, including the ssm, which has brought us here this evening. the process may well continue in the face of the war in ukraine and its geostrategic and energy implications for europe. incidentally, if this terrible war continues and sanctions are extended to energy imports, the european union, which is a large net energy importer from russia and shares borders with ukraine, may face acute economic and financial stability risks, which are not yet incorporated into our models. but can we afford to continue moving forward in this pattern of reform - through - crisis? i am not sure we can. the world around us is changing. we have all heard about de - globalisation. personally, i find the term somewhat misleading since important globalising forces are still at play today. but there is little doubt, concerns over supply chain security and diversification are becoming more dominant, increasing the need to provide a regional counterweight. this is the familiar theme of open strategic autonomy. in a recent speech at the peterson institute, president lagarde argued that the european union is “ well placed to succeed in a world where the global order is more fragmented ”, because of its large internal market and experience in arbitrating disputes between countries. true, but much more needs to be done to make the arbitration process and consensus - building more effective. the stakes are not just financial. as popular discontent and reaction to globalisation continue, they challenge some of the foundational principles of the democratic, rules - based order that we have taken for granted in the west. reform through crises, particularly ones prolonged by squabbles between member states, not only undermines europe ’ s role on the international scene, but also weakens social cohesion, fuelling anti - european sentiment and extremism. in this context, i am not sure we can afford – either financially, socially or politically – to keep relying on the same crisis - reacting propulsion mechanism. a multipolar and partially de - globalised world order, is one where the eurozone needs to act proactively, not re - actively. no doubt, most of the action required is political and rests with institutions beyond the central banks and supervision authorities. but let ’ s not underestimate the role these can play. first of all, there are several areas of financial integration where reforms have stalled. it ’ s never