- base simulation exercise conducted consistent with the information set as of the september 2022 ecb staff macroeconomic projections for the euro area. model reference as in angelini, e., bokan, n., christoffel, k., ciccarelli, m. and zimic, s. ( 2019 ), “ introducing ecb - base : the blueprint of the new ecb semi - structural model for the euro area ”, working paper series, no 2315, ecb, september. 20. the non - linearities with respect to the starting level of rates is inherent to ecb - base ’ s specifications of the investment decisions. as is standard in a macroeconomic model with a neo - classical trend, the capital share is inversely related to the level of the cost of capital. in a low - rate regime with a low cost of capital, the same absolute change in financing rates then has a larger marginal importance compared to a situation when the cost of capital is higher. the analysis refers to this particular non - linearity, but in principle other non - linearities, such as non - linear financial amplifications and changes in expectations, may be considered. 21. battistini, n., gareis, j., and roma, m. ( 2022 ), “ the impact of rising mortgage rates on the euro area housing market ”, ecb economic bulletin, issue 6 / 2022. 22. my focus is on transmission via the banking system and the bond market. in the euro area, the equity market is relatively underdeveloped and bank shares represent a significant proportion of the overall equity market. 23. only about 20 per cent of firms identify financing conditions as a problem, so the increase in the response rate is from a relatively benign initial situation. 24. the observation is corroborated by estimating a panel model where expected default frequencies are functions of both leverage and interest payments, besides individual expected earning, after controlling for firm fixed effects. 25. altavilla, c., darracq paries, m., nicoletti, g. ( 2019 ), “ loan supply, credit markets and the euro area financial crisis ”, journal of banking & finance, vol. 109, december. 26. see holm - hadulla, f. and thurwachter, c. ( 2021 ), “ heterogeneity in corporate debt structures and the transmission of monetary

the latter having equivalence arrangements with both the eu and the united 2 / 4 bis central bankers'speeches kingdom. towards a well - functioning capital markets union in the eu the events of the past year – the pandemic and brexit – have put renewed emphasis on the need for the eu to have a well - functioning capital markets union. in fact, eu leaders have agreed to finance the recovery from the pandemic by borrowing collectively through financial markets. the issuance of high - quality euro - denominated sovereign bonds under the next generation eu ( ngeu ) recovery fund is a step towards achieving deeper, more complete and liquid capital markets and establishing a european safe asset. as the commission intends to raise 30 % of the €750 billion recovery fund by issuing green bonds, ngeu is also expected to contribute to further developing sustainable and green finance. in parallel, the commission has set out 16 specific actions to boost the eu ’ s capital markets union, which are aligned with many of the ecb ’ s own priorities. 4 these actions aim to deepen and further integrate european capital markets, in order to allow investors, savers, firms and market infrastructures alike to access a full range of services and products, regardless of where they are in the eu. a deep, single capital market will also strengthen the international role of the euro, 5 as further developed euro - denominated markets, derivatives and benchmarks will reduce transaction costs, curb spreads and mitigate rollover risks. this will in turn attract foreign investors and widen the possibilities of using the euro in international transactions. conclusion let me conclude. assessing potential vulnerabilities in the light of current challenges is key to making financial markets and infrastructures more resilient. authorities and market participants are reflecting on the lessons to be learned from the pandemic and this will be a key topic of today ’ s discussions. our panellists will provide insights on ccp margin practices and the related funding and operational complexities that emerged last spring and which we need to address. this conference will also provide an opportunity to discuss the direct and indirect implications of climate change for central clearing. cash and derivatives markets have already developed products to facilitate sustainable investments and help hedge against climate risks. our panellists will also consider the changing clearing landscape, including some of the regulatory and supervisory cooperation issues i have mentioned and the global dimension of this debate. given the challenges currently faced by economies and financial markets, finding the right mix of internal capacity