questions that would need to be answered before engaging in prudent policy - making. 5 how would required collateral prepositioning at the discount window affect the availability or amount of fhlb 4 / 9 bis - central bankers'speeches advances that a bank can rely on for funding purposes? more broadly speaking, how will any requirement to preposition collateral at the discount window affect the availability and use of other funding resources or the day - to - day liquidity management practices of banks? a better approach would be to recognize and understand how the fhlbs support bank liquidity and work together with each fhlb through the reserve banks in advance of a bank stress to ensure that mechanisms are in place to facilitate the transfer of collateral to the discount window, and that the reserve banks have the appropriate seniority over such collateral. a practical and pragmatic approach will work to preserve the stability of the banking system much more effectively than disrupting the bank liquidity operations of the fhlb system that have been in place since the 1930s. when it comes to the next steps in liquidity reform, i think it is imperative that we tackle known and identified issues that were exposed during the banking stress in the spring of 2023. this must include updating discount window operations and technology and making sure that payment services are available when needed. but for other reforms, a number of important questions remain unanswered, including understanding both where there are frictions and weaknesses in the current bank funding landscape, and what the potential impact ( including intended and unintended consequences ) of these reforms on the banking industry could be. reform of supervision banking regulators play a vital role in promoting the safe and sound operation of individual banks and the stability of the u. s. financial system. these statutory responsibilities require banking regulators to ensure that banks are held to high standards : bank regulators enforce regulation to promote safety and soundness, engage in periodic examinations of banks and their holding companies, and require periodic reporting by regulated institutions. when a bank fails to meet these high standards, supervisory action can be taken to force remediation or, in some cases, impose an enforcement action that includes a civil money penalty. last year's banking stress highlighted the need for improvements in bank supervision, with several notable failures to identify and appropriately escalate issues during the examination process. supervision that is not focused on core risks erodes the resiliency in the banking system. bank failures and losses to the deposit insurance fund certainly demand

, or impose reorganisation measures. central banks may take actions aiming at restoring normal liquidity conditions in money markets or at ensuring the smooth operation of market infrastructures. finally, the third component, namely crisis resolution, relates to the arrangements aiming at an orderly handling of a financial institution facing solvency problems and the protection of the rights of creditors, notably depositors. in this case, treasuries have also an important role to play if and when the injection of public money is required. there is evidently a close interrelation between these three components of the financial stability framework. for instance, the effectiveness of crisis management and resolution largely depends on the existence of an efficient supervisory and central banking framework able to identify and react at an early stage to potential threats to financial stability. conversely, the effectiveness of supervisory action depends also on the existence of appropriate arrangements to support an orderly exit from the market by insolvent institutions. indeed, the fact that institutions could exit the market if they are affected severely by a crisis provides a powerful incentive for them to optimise risk management and draw up proper business plans. at the eu level, a key element is the cross - border dimension which characterises all three components of the financial stability framework. this dimension calls for a smooth and efficient cross - border interplay within and among the set of authorities involved in crisis prevention, management and resolution. in this respect, as a general observation, i would only say that the existence of the eurosystem provides an extremely strong and effective decision making in the area of central banking, while the level 3 committees are expected to develop their own cooperative network in the field of supervision. 2. key developments in the european financial system against this background, let me point out that the european financial system has experienced fundamental developments in the past years, which have a particular bearing on the eu financial stability arrangements. i would like to highlight three of them. first, the overall progress in european financial integration. the ecb ’ s analysis, conveyed through our annual report “ financial integration in europe ” demonstrates that financial integration has advanced significantly since the introduction of the euro at the level of financial markets, market infrastructures and financial institutions. progress has however differed considerably across market segments. the euro area money market has been strongly integrated since the introduction of the single currency, supported by the integrated market infrastructure for large - value payments. as to the wholesale banking segment, there are clear indications of strong progress in financial integration as well. for example, the