, europe has equipped itself with a new disciplinary framework. the heads of state signed a new fiscal compact over a year ago that fixes very strict rules and gives very extensive powers to the european commission to assess the compliance of member states. this new compact goes hand in hand with the introduction of rules for monitoring macroeconomic imbalances. it is important to understand what these institutional advances represent : in effect, they represent a new treaty creating very strong commitments for the states via rules that are far better calibrated and far more binding than those in place when european monetary union began. 3. monetary union is to be enhanced with a banking union as well as being a year that saw a considerable strengthening of fiscal and macroeconomic discipline in europe, 2012 also saw significant progress towards a banking union. why has a banking union suddenly become such an indispensable and urgent project? simply because we are now certain that many of the problems we have experienced could have been avoided with a banking union. a banking union is necessary for the smooth functioning of a monetary union for the following three reasons : • it breaks the link between banks and sovereigns by bringing banking supervision and crisis management to the federal level. with the banking union, banks will be considered as euro area institutions over and above their nationality ; it will ensure that credit conditions in the euro area will not depend on where you are but on who you are, which is what should be expected of an efficient financial market. • it allows re - integration of the european banking system. a supra - national supervisor is in fact better placed to assess the risks of cross - border activities and therefore to protect and encourage such activities ; it is not subject to national biases that can lead to the temptation of economic introversion. it is therefore more credible and strengthens stability and confidence in the area ; • moreover, it restores the full efficacy of monetary policy. if our monetary policy impulses are not transmitted uniformly to all of the area ’ s countries because of the bank - sovereign link, it undermines the very foundation of europe ’ s monetary union ; remember that three quarters of the financing of the euro area ’ s economy consists of bank loans. by breaking this link, a banking union would restore the federal dimension of monetary policy. today the first pillar of the banking union is being constructed : the single supervisory mechanism. we are currently working on legal issues, on identifying systemically important banks within the euro area, on the supervisory model, on the

climate and environmental risk disclosures. french banks have a head start in this regard, owing to the statutory disclosure requirements applicable to institutional investors since 2015 and the ongoing dialogue in recent years with the acpr, notably aimed at measuring action on climate 2 / 6 bis central bankers'speeches commitments. 1. 3 these vulnerabilities are a source of risk for financial stability [ slide 4 ] the vulnerabilities that i have just outlined could affect financial stability. if the public and private responses to these structural developments fall short, banks could be weakened, which in turn could adversely impact the real economy. in terms of the digital transition, competition from new intermediaries, such as fintechs, bigtechs and defi players, along with the rise of private digital assets like stablecoins and cryptoassets could ( i ) lead to fragmentation of financial and payment services, making them less safe and efficient, and ( ii ) cause banks to be crowded out of the value chain by the “ platformisation ” of financial services. defi especially is seeing pronounced growth, although the amounts in play remain small in absolute terms, as the chart illustrates [ slide 4 ]. moreover, these new participants and products are not currently subject to regulations and supervision comparable to those applicable to banks. this situation could eventually impact financial stability, notably if it is accompanied by decreased regulation of critical financial and payment services providers and a reduction in the security associated with regulation. as regards the challenge of moving to a more sustainable economy, the financial sector and the wider economy could be hurt by an inadequate or delayed response to the accelerated transition to a carbon - neutral economy. allow me to illustrate my point with an example : the banque de france conducted simulations based on macrofinancial scenarios prepared by the ngfs, which found that a delayed and disorderly transition would be far more damaging, costing up to 5. 5 % of french gdp by 2050. given their lynchpin role in financing the economy, banks must continue to be resilient amid the twin transition. this is especially necessary in europe where, unlike in the uk and us economies for example, bank loans are the main source of financing, accounting for approximately 70 % of financing for euro area businesses, compared with around 40 % in the united states. in saying this, i do not want to give the impression that banks are alone in providing financing to the economy. on the contrary, they need to harness the complementarities offered