witnessed in the euro area as a whole. banking union is expected to increase the efficiency of financial intermediation by banks. in a bank - based economy like the euro area, this is particularly relevant, because enterprises rely to a much greater extent on banks for funding than e. g. firms in the u. s. a. according to a recent ecb report, loans on bank balance sheets account for close to 50 % of nonfinancial corporate debt in the euro area, but only 20 % in the u. s. a. therefore, strengthening the banking system is also essential for the real sectors of the economy, as more resilient banks are much more effective in performing their vital functions vis - a - vis the real economy. bis central bankers ’ speeches first of all, a credible and respected supervisor together with clear rules on bank resolution will reduce the uncertainty premiums that many european banks currently pay on their refinancing. as the ecb is set to be an exacting and respected supervisor, banks subjected to its supervision will enjoy high confidence, and this should result in a reduction of the uncertainty premiums. moreover, the principle of bail - in in case of bank failures and the uniform cascade of liability as it is laid out in the banking recovery and resolution directive ( brrd ) will help strengthen market discipline, although the ensuing effects on banks ’ funding costs will differ depending on the structure of their liabilities. in some cases, this may entail additional costs, as banking industry representatives have pointed out. for example, unsecured creditors that until now have almost always avoided a bail - in will demand higher risk premiums. at the same time, deposits can be expected to become less sticky, which again might exert upward pressure on funding costs ( which will definitely be the case with the annual contributions to the resolution fund, scheduled at eur 5. 5 billion ). but overall, banking union will result in a more stable refinancing structure of the banking sector and thus enable banks to better contribute to the economy. likewise, banking union will be a strong incentive for banks to improve their risk management. yet, while it is certainly one of the central aims of banking union to make banks ’ lending policies more risk sensitive, supervisors will also have to bear in mind the impact their actions have on the real economy. banks ’ willingness and ability to share the risks of the real sectors of the economy lies at the heart of the house bank principle that

assess the stability of their policies and their readiness for this next integration step. the speed of further monetary integration must not compromise its quality. consequently, there will also be no uniform appropriate strategy concerning participation in the exchange rate mechanism and the adoption of the euro due to differences in the economic situation, the history and background of exchange rate and monetary policies. decisions have to be taken in accordance with the legal foundations on a case - by - case basis, and, simultaneously, equal treatment between new and current eu member states must be ensured throughout the whole process. the acceding countries are in the midst of an integration and catching - up process, and their equilibrium exchange rates will be subject to gradual changes and shocks over time. therefore, any premature euro area participation has to be avoided. an enlargement of the monetary union by well prepared countries will be a benefit for all member states and will continue the success story of european integration. ladies and gentlemen, from my point of view, it is vital for the new member countries to keep attaining strong but sustainable real economic growth that permits their income - per - capita levels to gradually approach the average income level in the present eu member countries. therefore, economic policies of the new member countries and any further steps in monetary integration should be oriented towards achieving sustainable real and nominal convergence, as both convergence processes are complementary to each other and should be pursued in parallel. let me conclude with expressing my conviction that the enlargement of the european union and the economic and monetary integration of the acceding countries will not only strengthen the role of the european union as a global player in the long term, but also make a sustainable contribution to stability, peace and welfare in europe. therefore, i am looking forward to this new era that lies in front of us, characterized by a larger number of member states and, in terms of ideas, by an even larger potential of human beings.