part of our reflections on the future of macroprudential policy after the covid - 19 pandemic. these challenges relate to the creation of what we call “ macroprudential space ” and to the complementarities between monetary policy and macroprudential policy in a monetary and banking union. as i will argue, addressing these two challenges will increase the effectiveness of the macroprudential framework and strengthen the resilience of the euro area banking sector to major unexpected shocks in the future. macroprudential space the experience of the initial phase of the pandemic illustrated the importance of having sufficient releasable capital buffers in the banking sector. when the pandemic struck in early 2020, macroprudential authorities in the euro area had little room for manoeuvre to release macroprudential capital buffers. only seven euro area countries ( including the three home countries of my fellow panel members ) had enacted or announced a countercyclical capital buffer requirement above zero. in the euro area banking sector as a whole, countercyclical 1 / 3 bis central bankers'speeches capital buffer requirements accounted for only 0. 2 % of risk - weighted assets at the end of 2019. by contrast, structural buffer requirements, comprising the capital conservation buffer, systemic risk buffers and buffers for systemically important institutions, stood at 3. 4 %. unlike the countercyclical capital buffer, structural buffers were in principle not designed to be releasable. but, unlike minimum requirements, buffers are there to absorb unexpected losses and to help sustain lending under stress conditions. in short, the fact that only a tiny fraction of capital buffers has been explicitly releasable limited the macro - financial stabilisation function of macroprudential policy. banks ’ reluctance to dip into their existing buffers seems to be driven by a desire to avoid market stigma and to keep some distance from the threshold for automatic restrictions on distributions. this could be an area of concern at the system - wide level, given that recent empirical evidence of bank behaviour during the pandemic suggests that banks are less active in maintaining credit supply if they operate close to the combined buffer requirement. a contraction of the credit supply could compromise the recovery and increase the risks to financial stability. recent research by ecb staff further suggests that having higher countercyclical capital buffers at the onset of the pandemic, which could have been released during the current crisis, would

equity returns. the more integrated the euro area equity market, the greater the benefits of spreading investments across sectors as opposed to country - based equity investment strategies. our statistics show that the elimination of intra - euro area currency risk has encouraged integration in the sense that the “ home bias ” in the equity holdings of institutional investors has been significantly reduced. yet, the country effect is still too important for it to be concluded that the euro area equity market is fully satisfactorily integrated. as regards the further integration of securities ( i. e. bonds and equity ) markets, a prominent role should be attached to the securities clearing and settlement infrastructure. the eurosystem strongly supports further integration in the securities infrastructure, the lack of which has also been identified by the socalled giovannini group as a barrier to integration that should be removed. to this end, the ecb takes part in the work of respective expert groups set up by the european commission. furthermore, in the central bank ’ s role as a catalyst for collective private - sector activities, meetings are held with representatives from the banking and securities settlement industry of the euro area to discuss the further integration of the euro securities settlement industry. i would also like to highlight the work that we have been carrying out in cooperation with the committee of european securities regulators ( cesr ) : last october we published standards for securities clearing and settlement systems in the eu that aim to adapt international recommendations to the european context. 7 these escb - cesr standards are conducive to the integration of eu capital markets, placing emphasis on common solutions and interoperability between systems. finally, i will move on to the banking markets. here, the degree of integration differs for the various types of banking activities, i. e. capital market - related activities, interbank ( or wholesale ) activities, and retail banking. see the ecb ’ s website at http : / / www. ecb. int / pub / pdf / other / escb - cesr - standardssecurities2004en. pdf. cross - border interbank loans and holdings of securities have, in relative terms, experienced substantial growth. while 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 ) at the end of 1997, this share has now reached almost 40 %, pointing to a higher degree of capital market integration in the euro area. in addition,