on financial integration in europe ”. this report was published for the first time last year and it displays, among other things, our most important indicators to assess the degree of financial integration in different parts of the financial system. the second report will come out next month, and will again feature a number of interesting analyses and conclusions. i would like to mention yet another example in this group of activities, namely our contribution to the possible extension of the market transparency provisions in the market in financial instruments directive, in short mifid, to financial instruments other than equities. the interest of the ecb in this issue follows in particular from the great importance of wellfunctioning markets for the transmission of monetary policy impulses. we explained our view at a public hearing held by the european commission in september 2007. focusing on post - schmiedel ( 2007 ), the economic impact of the single euro payments area, ecb occasional paper, no. 71, august. trade transparency in retail and wholesale bond markets, we proposed a market - led controlled experiment about the trade - off between transparency and liquidity. in such an experiment, post - trade transparency could be gradually introduced, starting for example with the most liquid bond market segment, in order to assess its effects on market liquidity. the ecb stands ready to support such an experiment. in the present time, the importance of transparency in financial markets to allow for an efficient processing of information has of course become particularly evident. finally, we provide central banking services that also foster financial integration. for example, most recently we successfully launched target2, the second generation of our large - value payment system. by moving from a system composed of mutually interconnected national real - time gross settlement systems to a common system with a single shared platform for payments, we achieve further harmonisation for users in different countries and realise considerable scale economies. we achieved a single price structure for both domestic and cross - border transactions, the possibility of consolidated liquidity management for cross - border financial institutions and a harmonised set of cash settlement services for a variety of connected systems. the new system started in november last year with the first wave of countries. more countries will join in a few days and the last wave will follow in may this year. with a view to maximising the benefits from target2, the eurosystem is currently also exploring the possibility of providing settlement services in central bank money for eurodenominated securities transactions. the objective of this project, called

sufficient condition per se as is clearly demonstrated in the present episode of turbulence and as was regularly observed in the previous periods of sharp and abrupt market corrections. and that is the reason why it is so important, so decisive that we draw all the lessons from the present episode, across the board, without any prejudices, without giving any privilege of untouchability to any part and parcel of global finance. from that standpoint i think the work of the financial stability forum – scrutinizing liquidity risk management as well as credit rating agencies, analysing without complacency the weakness in the structure of incentives of the “ originate to distribute ” model as well as the monitoring of the off - balance sheet vehicles, examining the implementation of the basel ii agreement as well as the arrangement for dealing with in particular weak cross - border financial institutions – is of the essence. third, even with a right and pertinent diagnosis, and appropriate significant improvements in benchmark voluntary principles and codes of conduct for the private sector as well as substantial progress in rules and regulations, in cooperation and coordination between authorities where needed, my understanding is that we could not be ensured that the “ unavoidable and necessary market corrections ” of the future will be reasonably “ smooth and orderly ”. for a higher likelihood of that to happen we need probably simultaneously what i would call a further significant change of culture at national as well as at global level. i would sum up this change in our overall approach with these words : transparency, holism and anti cyclicality. transparency because enhanced public information on institutions as well as on financial instruments is the only way we have to avoid contagion and herd behaviour in times of difficulty. holism because, technology and globalisation helping, we have progressively built global finance on the basis of the very close interconnections of all markets, all institutions, all economies. we must continue to improve our full understanding of the functioning of the financial system as a whole. the financial stability forum gathering banking, insurance and market surveillance authorities, central banks, international financial institutions, treasuries etc., was the first major illustration of this necessity to address the global financial system as a whole. we have to reinforce considerably this holistic approach. and anticyclicality because a number of rules and regulations, on the one hand, and of behaviours of public and private institutions as well as of markets, on the other hand, have a tendency to be largely procy