yves mersch : the single market and banking union speech by mr yves mersch, member of the executive board of the european central bank, at the european forum alpbach 2013, alpbach, 29 august 2013. * * * ladies and gentlemen, thank you for inviting me to speak today at the alpbach forum. the topic of my remarks will be banking union, and in particular the role of banking union in supporting the single market in europe. governments have recognised that certain powers need to be at the european level for a single market to function. but what we have seen in the crisis is that we do not yet have the right powers at the european level to support a single market in capital. when placed under stress, financial markets in europe have renationalised, with negative effects on the single market in goods and services as well. we see banking union, therefore, not only as a necessary complement of monetary union but also as a way of putting in place the necessary institutions, rules and instruments to sustain a genuinely single financial market. these include a single supervisory mechanism ( ssm ) – and a single resolution mechanism operating under a harmonised resolution framework. and i would like to use the main part of my remarks today to highlight three specific channels where i think banking union can be strongly positive for the single market. first, by encouraging greater cross - border banking integration. second, by increasing confidence in banks ’ balance sheets. third, by helping to break the bank - sovereign nexus. channel 1 : encouraging cross - border banking integration starting with the first channel, we expect banking union to play an important role in boosting financial market reintegration in europe and the creation of a truly european banking sector. ideally, we would like to see a situation where, if the spanish sme cannot borrow at reasonable rates from a spanish bank, it would be able to borrow from an austrian bank instead. this is what a single market in capital means. banking union can facilitate this by creating the same standards for banks across europe. let me point to three developments which may encourage banks move out of their domestic markets. first, we are harmonising technical approaches to supervision, which will reduce compliance costs for banks and increase comparability across borders. every bank that is part of the ssm will be supervised according to a single supervisory model and use the same data reporting template. second, we are building a single supervisory culture, which will provide a basis for genuinely european banks. it will

the vice - chairman of the federal open market committee, the fed committee that sets monetary policy to promote its statutory goals of full employment and price stability. last week, the committee reaffirmed that it currently anticipates that the federal reserve ’ s federal funds rate target will remain exceptionally low – which i understand to mean at its current level – at least through late 2014. the fomc also voted to provide additional support for economic activity by extending its maturity extension program – popularly referred to as operation twist – through the end of the year. this extension means that we will be buying an additional $ 267 billion of longer term treasury securities, paid for by selling or redeeming the same amount of shorter term treasuries. this action reduces the supply of longer dated treasury securities on the market and lowers longer term interest rates relative to where they would otherwise be in the absence of such a program. that puts downward pressure on corporate borrowing costs and mortgage rates, and supports asset prices such as housing and equities – all of which promotes growth. in addition, the fomc adopted new language to describe its policy outlook, stating that it is “ prepared to take further action as appropriate to promote a stronger economic recovery and bis central bankers ’ speeches sustained improvement in labor market conditions in a context of price stability. ” i will let those words speak for themselves. local economic conditions now let me turn to economic conditions in puerto rico. puerto rico ’ s real, or inflation - adjusted gross national product has declined for the past four years and this has been accompanied by a sharp decline in the real income of island residents. according to a monthly index of economic activity produced by the government development bank for puerto rico, economic activity began to decline as far back as 2005. although the index has been stable for the past several months and this may be a signal that the economic downturn on the island may have ended, a solid recovery has yet to take hold and conditions remain challenging. the job market remains a trouble spot for the island ’ s economy. total employment fell by about 13 percent or roughly 140, 000 jobs, between its peak back in 2005 and mid - 2010. this is nearly double the 7 percent job loss on the mainland. for the past two years, employment has appeared to have bottomed out, but there has been little evidence of recovery. the island ’ s unemployment rate has fallen by more than a percentage point over the past year, but this is not necessarily good news.