monetary policy throughout the euro area. financial integration also helps financial systems to channel funds from those economic agents that have a surplus of savings to those with a shortage ; in particular, it enables agents to effectively trade, hedge, diversify and pool risks. as a result, there is a better sharing and diversification of risk. according to academic research, in the united states, over the period 1963 - 90, capital markets smoothed out 39 % of the shocks to gross state product ( the equivalent to gdp ), the credit channel smoothed out 23 % and the federal government, through the fiscal channel, 13 %. 5 around 25 % of the shocks were not smoothed out. hence financial markets and financial institutions contributed 62 % to the absorption of idiosyncratic state shocks. we therefore see from the us example that the financial channel can be much more important than the fiscal channel. this is an additional reason for speeding up financial integration in europe. in a more recent study, it was found that the situation in the euro area countries has begun to converge towards that of the united states as inter - euro area country capital flows increase. it was found that in what would become the euro area countries ( excluding luxembourg ), capital markets would have smoothed out about 10 % of the country - specific shocks to gdp between 1993 and 2000. 6 a set of indicators, published by the ecb, points to an increasing degree of integration of euro area financial and banking markets since 1999. 7 moreover, the size of capital markets – in terms of the ratio of the total value of stock, bond and loan markets to gdp – has increased substantially since 1999, and has the potential to grow even further, as seen from a comparison with the united states. in the period 1995 - 99, it was 177 % of gdp in the euro area and 279 % in the united states ; in 2005 - 06 it had increased to 256 % in the euro area, and 353 % of gdp in the united states. in germany this ratio rose from 202 % to 229 % of gdp. integration in retail banking, by contrast, has been slow so far. there are still significant differences in bank deposit and lending interest rates across euro area countries. in the euro area, the cross - country dispersion is higher than the intra - regional dispersion of the same rates in the united states. 8 this notwithstanding, overall there is evidence of growing economic and financial integration among the countries of the european union. the adoption of the euro

sabine lautenschlager : single supervisory mechanism – single supervisory law? keynote speech by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the single supervisory mechanism, at the workshop of the european banking institute ( ebi ), hosted by the european central bank, frankfurt am main, 27 january 2016. * * * ladies and gentlemen, thank you for being here today to participate in the first conference of the european banking institute ( ebi ). it is a great pleasure for the european central bank ( ecb ), and for me personally, to host this conference. we look forward to fruitful discussions and exchanges – not only today, but also in the future. the ebi is a very new undertaking – it was set up just at the end of 2015 as a counterpart to the single supervisory mechanism ( ssm ) in the academic world. it represents a network of universities that extends across national borders, and we hope that it will eventually encompass the entire euro area. it should provide a good opportunity for academics and practitioners to meet regularly to exchange views on issues around supervisory and banking law. will it be difficult for us to find topics for these in - depth discussions? i don ’ t think so! after one year of “ living the ssm ”, i can assure you that we have more than enough legal topics to discuss and enough difficult questions to answer! the advent of banking union has brought with it a myriad of legal questions with a unique european perspective. i would therefore like to open the discussion by raising a legal issue in my speech today. the crisis in the euro area has taught us many lessons. and among these, a fundamental one might be this : a single european currency requires a european banking supervisor. in the euro area, we cannot have 19 different national banking supervisors ; we need a single supervisor that transcends national borders. only then can we avoid national bias in the regulatory and supervisory treatment of banks ; only then can we improve risk - sharing in the euro area ; only then can we ensure a level playing field where the general principle of “ same business, same risks, same rules ” applies ; and only then can we guarantee a proper transmission of monetary policy. establishing european banking supervision has been a significant step towards a more integrated european banking system. throughout the entire euro area, the ssm provides tough and fair - handed banking supervision by using the entire range of supervisory discretion to