they form the basic structure that makes the financial markets to operate as one entity. without well - functioning payment systems markets would be fragmented : locally, regionally, or nationally. broad and competitive financial markets are impossible without an efficient and a unified payment system. financial integration within the eu offers great opportunities to improve europe's growth potential. the integration promotes economic growth for several reasons : • first of all, the required return on an investment project is reduced, because financing is available at a lower price. this increases investment and employ - ment. • second, consumers benefit directly from smaller interest rate margins and decreased service fees. • third, a greater variety of financial services becomes available. this adds to the benefits of the customers of the financial services sector. • in addition, financial integration increases the stability of the eu economy, because an integrated financial system balances risks between countries. the effects of country specific fluctuations are dampened and shared more evenly, as the cross border ownership and trade of financial claims increase. in the u. s., a significant part of so called asymmetric region specific income fluctuations are neutralised through the integrated financial system. the common monetary policy creates another, specific need for the euro area financial system to be as integrated as possible. integration reduces the asymmetry of the effects of monetary policy across countries. today, we have a common monetary policy but we do not have an integrated internal market for financial services. a lot has already been done within the eu to promote financial integration. an important instrument in this process has been the financial services action plan ( fsap ). it contains 42 measures, and almost all of them have been adopted at the eu level. however, the national implementation of many of the measures is still incomplete. a continuation to the fsap in the form of further measures has already been discussed. ultimately, the integration of the eu financial system, however, will not result from authorities'actions or regulation. integration is realized when the market participants change their way of doing business. the task of the authorities is to remove obstacles to integration and to take care of the development of the regulatory and supervisory framework. the three main areas where financial integration should proceed are all related to market infrastructures. the first is to create a common european market in retail banking. here, the development of payment systems plays an important role. secondly, securities clearing and settlement systems need to be made more integrated and efficient. the third area where progress is most needed is

lawrence schembri : stress prevention – central banks and financial stability remarks by mr lawrence schembri, deputy governor of the bank of canada, at a joint bank of canada, international monetary fund, centre for international governance innovation and peterson institute for international economics workshop, ottawa, ontario, 6 may 2016. * * * for the better part of the past two centuries, central banks have played an important role in the maintenance of financial stability, but primarily one of “ stress or crisis management. ” in particular, central banks have served as lender of last resort, providing liquidity to prevent stress from sparking contagion in solvent, but illiquid, financial institutions. but that role is starting to change. while central banks responded boldly to the global financial crisis with liquidity provision and monetary policy actions to avoid a repeat of the great depression, the severity of the economic fallout obliges us to ask whether they could have done more to prevent it, rather than just trying to manage and mitigate its economic impact. this query goes well beyond considering whether monetary policy aggravated the financial vulnerabilities that contributed to the crisis and raises broader questions concerning the responsibilities of central banks. it ’ s time, then, for central banks to rethink their role in financial stability : • first, by recognizing that while the best contribution monetary policy can make to financial stability is price and macroeconomic stability, this is a necessary, but not sufficient, condition for financial stability ; • second, by focusing on crisis prevention through means other than monetary policy, while at the same time modernizing their role as liquidity provider or lender of last resort ; and • third, by enhancing their contribution to financial stability by exploiting two of their key strengths – their financial - system - wide perspective and their analytical capacity. going beyond monetary policy as a crisis prevention tool in thinking about enhancing the role of central banks, we should reconsider two notions that have helped to advance our analysis. the first is the “ lean versus clean ” debate. as lars svensson has compellingly argued, monetary policy is too blunt an instrument to be used to mitigate financial vulnerabilities. other tools are better suited for this purpose. the second notion is the “ lines of defence ” analogy, with monetary policy serving as the last defensive barrier when other measures to reduce financial vulnerabilities and mitigate systemic risks are either absent or inadequate. this view suggests that actions be taken sequentially. consider,