non - financial corporate bonds have risen from 14 % of the outstanding volume in 2008 to 27 % by the first quarter of this year. 13 this shift has undoubtedly been beneficial by acting as a buffer for the real economy while bank credit has been contracting. however, as the sector continues to expand and increase its role in lending to the real economy, as its interlinkages with the wider financial sector deepen, and as the footprint of large institutions grows, non - banks will only gain in systemic importance. moreover, the more policymakers are effective in using macroprudential tools to constrain excessive credit growth in the banking sector, the more likely it becomes that there will be excessive adjustments in the non - bank sector through leakages. for these reasons, the coverage of the macroprudential framework needs to start being extended to the shadow banking sector. in this context there are four issues in particular that i would like to highlight. first, there is the need to improve the information available to policymakers on the build - up of leverage within the shadow banking sector. typically the issue of leverage has been seen as less relevant for shadow banks than for banks, as they receive the bulk of their funding by issuing shares. as a result, the aggregate ratio of assets to equity for euro area investment funds is only 1. 1, over ten times smaller than that of euro area credit institutions. however, this figure is misleading as most of the equity in investment funds is demandable, meaning it can be withdrawn at any time by investors. in addition, derivatives positions in particular can embed sizeable leverage, potentially adding to deleveraging pressures when financial stress emerges. 14 such “ synthetic leverage ” can stem from derivative instruments or securities financing transactions that create exposures contingent on the future value of an underlying asset. 15 for example, taking the financial reporting of a large alternative fund, and calculating leverage using a gross measure that includes the above underlying exposures, it can be found that leverage goes up to a level of 700 % of nav. at the same time, the fund ’ s prospectus indicates that it could go up to 900 %. when using the commitment approach, however – i. e. taking into account netting and hedges – leverage could be expected to reach a maximum level of 170 % of nav. in other words, “ synthetic leverage ” can be many multiples higher than the leverage suggested by headline ratios. data availability however still limits the ability of authorities to monitor

of emu in 1999, which compares very favourably with the somewhat more than two million increase in the eight years before 1999. according to the latest spring forecast by the european commission, prospects are for another 3. 8 million employed persons in the euro area in the period 2007 - 08. financial regulation, supervision and stability let me now turn to an issue you have asked me to discuss today, which is the framework for financial regulation, supervision and stability and the way in which it can cope with the challenges stemming from increasing financial integration. starting with financial regulation and supervision, the lamfalussy framework was introduced with the purpose of speeding up the process of adopting community legislation and making its implementation more consistent at the national level in line with the needs of the single financial market. as such the lamfalussy framework represents in itself an important institutional innovation and therefore we have always shared the stance that it should be exploited to the maximum possible extent before considering any far - reaching institutional changes. this entails in practice that all four levels of the approach should work at their best and, when this is not the case, appropriate measures should be taken. it is therefore important – as it has been the case so far – to monitor systematically the concrete implementation of the framework to identify areas for possible enhancement. while at the beginning, the monitoring activity concentrated on the regulatory part of the approach ( notably the level 1 and 2 ), the focus has rightly turned more recently to the supervisory level ( i. e. the level 3 ). one of the main challenges concerning the level 3 activity is to ensure that the deliberations taken by the supervisory committees concerning co - operation and convergence are applied consistently in practice. in this respect, the concrete implementation of the recommendations contained in the report on financial supervision prepared by the financial services committee and endorsed by the ecofin council on 5 may 2006 represents certainly an important milestone. more generally, the forthcoming review of the lamfalussy process represents an important occasion for further reflections about the efficiency and effectiveness of the current eu supervisory setting. in this context, an important objective of the review should be the identification of concrete measures to further strengthen the supervisory role of the level 3 committees. turning to the framework for financial stability, the ecb supports in general the current discussions at the eu level to enhance the arrangements for handling financial crises, never forgetting that a crucial responsibility must remain with the private sector itself. it is important indeed that all competent authorities for financial stability, namely central