border activity hold a sizable – and rising – share of total eu banking assets. as one looks at the data in more detail, it emerges that the intensity and geographical scope of foreign activity varies considerably among banks. a simple measure of this, referring to the banking activity performed within the eu and based on 2005 data, shows that only 16 banking groups out of 46 hold at least 25 % of their eu assets outside their home country and are present in at least 25 % ( i. e. six ) of the other 24 eu countries. these 16 groups – which could be labelled “ key cross - border players ” – account for around one - third of total eu banking assets, hold on average 38 % of their eu assets abroad and are present in almost half ( 44 % ) of the other eu countries. this indicates that there is ample room for further intensification of cross - border banking activities in the eu. the eu supervisory framework has an important role to play in this regard. let me elaborate on this aspect. supervision of cross - border banking groups a first consideration is that the supervisory framework in the eu should be supportive of a market - led process of cross - border banking as a driver of further banking integration. crossborder banks may act, via their expansion across jurisdictions, as important drivers in the financial integration process and thus contribute to enhancing the overall efficiency of the banking sector. the supervision of cross - border banks is performed mainly on a national, stand - alone basis, which results in a large number of partially overlapping and also potentially diverging requirements, thereby raising the costs for banks. moreover, cross - border banking expansion has taken place predominantly via the establishment of foreign subsidiaries rather than branches. for the key cross - border players, for instance, foreign subsidiaries account for 60 % of total assets held abroad. this increases the overall cost of supervision, given the evidently more far - reaching responsibilities and the correspondingly closer involvement of supervisors. therefore, efficient supervision at group level should be pursued, through consistent supervisory requirements and approaches and closely coordinated measures to fully exploit synergies. a second consideration is that the supervisory framework in the eu should maintain its effectiveness in safeguarding financial stability in a more integrated banking and financial sector. when the eu arrangements for financial supervision were established, the underlying premise was that potential disturbances at a bank would remain largely confined to the national level. we all agree that this assumption no longer holds. indeed, given the rising intensity and scope of the foreign activities of eu banks

11 million since its trough in mid - 2013. at the same time, while investment is supported by favourable financing conditions, it was curbed by the slowdown in the euro area growth momentum and by the elevated uncertainties over the past quarters. looking ahead, the underlying fundamentals for a continued though moderate expansion of the euro area economy remain in place, as foreseen in the december 2019 eurosystem staff projections, which entail annual real gdp increasing by 1. 1 % in 2020, 1. 4 % in 2021 and in 2022. but the risks surrounding the euro area remain tilted to the downside. in particular, the outbreak of the coronavirus and its potential effect on global growth add a new layer of uncertainty. the modest growth performance of the euro area economy is also reflected in subdued inflation 1 / 3 bis central bankers'speeches dynamics. according to eurostat ’ s flash estimates, headline inflation increased to 1. 4 % in january, up from 1. 3 % in december 2019, reflecting mainly higher energy and food inflation. measures of underlying inflation are subdued, although they have mildly increased from earlier lows. wage growth remains resilient and broad - based, and is expected to shore up inflation in the upcoming months. with the decline in unemployment and the tightening of labour markets, labour cost pressures have strengthened. recent data on negotiated wages continue to signal robust wage growth, which is expected to gradually push up underlying inflation. however, the weaker growth momentum is delaying the pass - through to inflation, as firms appear to be absorbing wage rises in their profit margins rather than passing them on to customers. while survey - based long - term inflation expectations in the euro area have remained anchored at levels of at least 1. 7 %, market - based measures of long - term inflation expectations have stagnated at levels that are not consistent with our medium - term inflation aim. overall, inflation is expected to increase, supported by the ongoing expansion, the solid wage growth and our monetary policy measures. this is broadly reflected in the latest december 2019 eurosystem staff projections, which foresee inflation at 1. 1 % in 2020, 1. 4 % in 2021 and 1. 6 % in 2022. at the same time, annual hicp inflation excluding energy and food is expected to be 1. 3 % in 2020, 1. 4 % in 2021 and 1. 6 % in 2022. the monetary policy stance against a backdrop that remains clouded, the euro area economy