speech climate change and financial integration keynote speech by luis de guindos, vice - president of the ecb, at the joint ecb and european commission conference on “ european financial integration and stability ” frankfurt am main, 27 may 2021 introduction for europe, financial integration and stability are two sides of the same coin – a symbiotic relationship where greater integration aids stability, and stability underpins greater integration. equally, financial fragmentation can exacerbate instability, as the global financial crisis clearly showed. climate change – the topic of this afternoon ’ s session – poses an emerging threat to financial stability. yet, as i will discuss in my remarks today, it also presents us with an opportunity to forge deeper integration in order to tackle this common challenge. policies that foster stronger and more resilient financial integration within the euro area are needed more urgently than ever. financial integration in the euro area let me begin with a quick recap of why financial integration matters. [ 1 ] when a negative shock hits the whole euro area, monetary policy can act to mitigate the impact on output and inflation. but when a shock hits an individual country or region – known as an asymmetric shock – other mechanisms are required. in this situation, financial integration can help mitigate the impact through improved public and private risksharing. lower economic activity following the shock typically reduces the profitability of local banks and stymies credit creation. continued lending from other parts of the euro area can therefore help cushion the impact and support consumption and investment. in addition, holding foreign bonds – which are less affected by the asymmetric shock – helps maintain income and support domestic consumption. in the united states, these channels alleviate around 60 % of the impact of state - level shocks on gdp growth, compared with just 20 % in the euro area. indeed, the contribution of credit smoothing in the euro area was negative during the global financial crisis as cross - border credit provision evaporated, worsening the recessions in the periphery. during the pandemic there have also been sizeable swings in measures of financial integration, albeit more muted than during the financial crisis. [ 3 ] indicators based on the convergence of asset prices declined sharply at the onset of the pandemic, but then rebounded following the ecb ’ s announcement of substantial monetary accommodation and subsequent progress on european fiscal support packages ( chart 1 ). movements in quantity - based financial integration indicators, which reflect cross - border asset holdings, have been slower

. the erpb is composed of high - level representatives from both the supply and demand side. on the supply side, there are representatives of the banking community, payment institutions and emoney institutions. on the demand side, there are representatives of consumers, retailers with physical premises, internet retailers, businesses / corporates, small and medium - sized enterprises and national public administrations. representatives of national central banks participate in the board ’ s work on a rotating basis and the european commission participates as an observer. the activities of the erpb are very much linked to the challenges and priorities for innovation in retail payments. i will talk about some of these issues, in particular instant payments, in more detail in the third part of my speech. next, however, i would like to talk about the new payment service providers that have been emerging in the market. new payment service providers the wallet in your pocket containing euro banknotes and coins and some debit or credit cards tells you something about payment service providers. the cards you have may be issued by a bank – if you have for example visa or mastercard – but they may also be issued by a card scheme – if you have for example amex or diners. card schemes and money transfer service providers such as western union or moneygram are examples of established non - bank payment service providers. these are new market entrants, different to the traditional banks, and history shows us that new entrants have long been a part of the retail payments market. for example, merchants were the initial drivers of the introduction of payment cards in the us in the 1930s, and, just a couple of years ago, it was a mobile network operator in kenya that succeeded in making mobile payments widespread in that country. in europe, it is expected that non - banks will have a stronger role in payment markets in the years to come. this will contribute to a wider choice of products and increased competition. one category of non - bank payment service providers is that of payment institutions. payment institutions came into being as a result of the enactment of the payment services directive, http : / / ec. europa. eu / smartregulation / roadmaps / docs / 2015 _ fisma _ 031 _ other _ outside _ cwp _ green _ paper _ retail _ en. pdf. bis central bankers ’ speeches or psd1. among other things, payment institutions can execute payment transactions for you. with the revised payment services directive, or psd