of the single monetary policy throughout the euro area, but also to the smooth operation of the underlying payment systems. financial integration also increases the depth and liquidity of financial markets, and consequently enhances the resilience of the european financial system. it also offers greater scope for geographical risk diversification, promoting consumption and income risk sharing. integrated financial markets also help to realise the full economic potential of the european union, as recalled in the lisbon strategy. financial integration contributes to the i am very grateful to monika hempel and simone manganelli for their valuable input to this speech. development of the financial system by increasing competition and expanding markets, which results in lower intermediation costs and a more efficient allocation of capital. these effects, in turn, raise the potential for long - term non - inflationary economic growth. for all these reasons the ecb is closely monitoring the degree of integration and development of euro area financial markets. since 2005, we have been publishing indicators of financial integration in the euro area, together with a report providing an overall assessment of the degree of financial integration in the main financial market segments, ranging from retail loans to wholesale equity trading. besides monitoring and raising awareness about the state of european financial integration, the ecb contributes to the enhancement of financial integration by providing central banking services ( as in the case of payment systems ), giving advice on the legislative and regulatory framework, and acting as a catalyst for private sector activities. according to our definition of financial integration – which underpins our quantitative analysis – financial markets are considered integrated if all agents face the same set of rules, are treated equally and have equal access to financial products. if these conditions are satisfied, any price difference between two identical assets should be immediately arbitraged away by rational agents. reflecting the most recent advances in research, we have developed a number of quantitative indicators based both on quantities and prices. until the start of the financial crisis, the degree of financial integration has been continuously increasing, although at different speed, across the various market segments. the money market – where banks lend to each other on a very short term – appeared to be the most integrated. also, government and corporate bond markets have been quite integrated, too. in contrast, equity and retail banking markets are the least integrated. three conclusions stand out in this regard. first, integration is typically more advanced in those markets that are closer to the single monetary policy. second, wholesale markets tend to be more integrated than retail markets. third,

overseers and supervisory authorities. the main objective of all these principles and responsibilities is to create a more secure and efficient structure for authorities of fmis that also includes payment systems. in this regard, i think that all authorities related to payment systems will do their utmost to achieve harmonization of these systems and apply the said principles in the near future. further international studies carried out in this field will focus on the implementation of these 24 principles. distinguished participants, cross - border connections of payment systems progressively gain importance in line with the increase in the volume of foreign trade. in the meantime, studies geared towards developing the international payment systems continue all around the world. i think this conference will significantly contribute to these studies and i very much hope that it will be a useful and fruitful conference. i would like to thank you all for listening. bis central bankers ’ speeches