financial corporations of around €2. 5 trillion in the united states is still three times larger than in the euro area ( while the respective gdps are comparable ). a rapid integration is also taking place in euro area equity markets. stock prices across the euro area increasingly react to euro area - wide factors and news. furthermore, the elimination of intra - euro area currency risk and, most importantly, the reduction of direct and indirect costs for cross - border portfolio transactions has reduced the “ home bias ” in the equity holdings of institutional investors. a simple inspection of the data reveals that european countries increased their holdings of euro area international assets ( as a share of their total international portfolio ). over the 1997 - 2003 period, the share of intra - euro area allocation increased markedly by 10 percentage points for equity portfolios and by almost 25 percentage points for fixed income portfolios. there is nevertheless potential for greater integration particularly in the equity market. cross - border interbank loans and holdings of securities are another area in which we have seen significant progress. at the end of 1997, securities issued by non - monetary financial institutions of another euro area country accounted for only 16 % of the securities held by euro area monetary financial institutions ( mfis ). this share has now reached almost 40 %. but integration in retail banking has been slow so far. consolidation in the banking sector has taken place mostly as a result of domestic mergers whereas cross - border banking mergers have started to happen only over the recent years. in this respect, whereas a number of euro area banks have considerably expanded their interests outside the euro area, cross - border activity within the euro area a more sophisticated analysis based on an international portfolio choice model reaches the same conclusion ( see de santis and gerard, 2006, “ financial integration, international portfolio choice and the european monetary union ”, ecb working paper series, n. 626. ). emu has enhanced regional financial integration in the euro area in both the equity and bond markets. there is evidence of active trading among euro area member states, with euro area investors assigning a higher weight to portfolio investment in euro area countries. over the period 1997 - 2001, the average increase in weights – on top of the world average portfolio weight increase in euro area assets – amounts to 12. 7 percentage points for equity holdings and 22. 4 percentage points for bond and note holdings. has remained relatively limited, though it is gaining importance. the continuation of this trend is expected to result in an increase in

- that the costs of new methods of control must be weighed against the risks to be managed. regardless of the fact that there are now outstanding issues to be resolved to improve risk management, my overall conclusion is positive. the development underway with regard to identifying, measuring and managing risks provides possibilities to improve stability in the banks and other parts of the financial sector. we still have some way to go, but the work is proceeding and is presently in an intensive phase in both the financial institutions and the authorities concerned. the riksbank intends to continue to play an active role in this work. thank you.