weaknesses in the regulation and supervision of banks around the world, in the eu such weaknesses were exacerbated by fragmentation. from the early stages of the crisis the banking sector fragmented along national lines, driven by diverging macroeconomic conditions in different countries and by governments ’ diverging responses in dealing with failing banks. differently from the us, common resolution frameworks backstopped by public money were absent. governments that could do so, because of their sound budgets, massively bailed out their failed banks. an opportunity for bank consolidation was lost, but their economies were spared a credit crisis after a financial crisis. in other countries where bailouts were not possible due to constrained finances or new regulatory restrictions introduced by the bank recovery and resolution directive ( brrd ), the crisis lasted much longer. european supervision and the european framework for managing bank failures, of which the brrd is an important part, have made such a cause of fragmentation, namely the different countries ’ responses to banking crises less likely today. but more needs to be done. 4 / 6 bis central bankers'speeches progress in completing the banking union – namely, first harmonising options and discretions, completing resolution, and laying the groundwork for the creation of an effective deposit insurance – is essential and i am confident that significant steps in this direction will soon be taken. but let ’ s keep in mind that fragmentation starts with the decision by banks not to operate in regions where the risk - return of lending is judged to be insufficient to remunerate their invested capital ultimately, what ensures a steady flow of bank lending to the economy, even in times of unforeseen stress or disruption, is a growth - friendly environment, which can only be assured by the appropriate government policies. 1 report to the council and the commission on the realisation by stages of economic and monetary union in the community ( werner report ), 1970 ; report on economic and monetary union in the european community ( delors report ), 1989 ; padoa - schioppa t. ( 1999 ), “ emu and banking supervision ”, international finance, vol. 2, no 2, pp. 295 – 308 2 ecb ( 2008 ), financial integration in europe, april. 3 see : about the single supervisory mechanism 4 european central bank ( 2016 ), “ chapter 1 – topical issue : the ecb ’ s macroprudential policy framework ”, macroprudential bulletin, issue 1. 5 the 10 % average requirement refers to

benoit cœure : european ccps after brexit speech by mr benoit cœure, member of the executive board of the european central bank, at the global financial markets association, frankfurt am main, 20 june 2017. * * * thank you for inviting me here today. in my short remarks i would like to say a few words about a topic that has received much attention lately : central clearing, and its importance for central banks in the context of brexit. the extensive coverage of central counterparty ( ccp ) clearing in the press and other media these days shows how critical these infrastructures have become since the financial crisis. it is easy to see why ccps have become so important for financial stability. they helped fix a major defect in our financial system, namely the reliance on, and associated counterparty risk of, opaque bilateral over - the - counter trading of derivatives. in our highly interconnected markets, ccps have thus become effective vehicles for reducing systemic risk in our financial system. and in doing so, they play a key part in ensuring that central banks are in a position to pursue their primary objective : price stability. our challenge today is to ensure that ccps do not themselves become a risk to financial stability and, hence, generate potential impediments to the transmission of monetary policy. ccps have grown in scale and scope to the extent that a disruption affecting a major ccp would have a significant impact on banks, markets and the instruments we rely on to perform our core central banking activities. 1 for example, many of our key monetary policy counterparties in the euro area are participants in ccps around the world, and are thus directly exposed to potential strains in centrally cleared markets. asset classes such as repos, which play a direct role in our monetary policy operations, are increasingly being cleared through ccps. any closure of certain repo market segments due to a ccp failure would therefore inevitably limit our ability to align money market conditions with our monetary policy intentions. moreover, financial stress resulting from a struggling ccp could have a knock - on effect on the smooth operation of payment systems, with obvious and probably serious consequences for the real economy. in a severe crisis, we might even be expected to extend emergency lending to a failing ccp or to its participants although this would only be done at our own discretion : an automatic right to central bank liquidity could create serious moral hazard concerns. 2 in short, the safety and soundness of ccps matters