, or impose reorganisation measures. central banks may take actions aiming at restoring normal liquidity conditions in money markets or at ensuring the smooth operation of market infrastructures. finally, the third component, namely crisis resolution, relates to the arrangements aiming at an orderly handling of a financial institution facing solvency problems and the protection of the rights of creditors, notably depositors. in this case, treasuries have also an important role to play if and when the injection of public money is required. there is evidently a close interrelation between these three components of the financial stability framework. for instance, the effectiveness of crisis management and resolution largely depends on the existence of an efficient supervisory and central banking framework able to identify and react at an early stage to potential threats to financial stability. conversely, the effectiveness of supervisory action depends also on the existence of appropriate arrangements to support an orderly exit from the market by insolvent institutions. indeed, the fact that institutions could exit the market if they are affected severely by a crisis provides a powerful incentive for them to optimise risk management and draw up proper business plans. at the eu level, a key element is the cross - border dimension which characterises all three components of the financial stability framework. this dimension calls for a smooth and efficient cross - border interplay within and among the set of authorities involved in crisis prevention, management and resolution. in this respect, as a general observation, i would only say that the existence of the eurosystem provides an extremely strong and effective decision making in the area of central banking, while the level 3 committees are expected to develop their own cooperative network in the field of supervision. 2. key developments in the european financial system against this background, let me point out that the european financial system has experienced fundamental developments in the past years, which have a particular bearing on the eu financial stability arrangements. i would like to highlight three of them. first, the overall progress in european financial integration. the ecb ’ s analysis, conveyed through our annual report “ financial integration in europe ” demonstrates that financial integration has advanced significantly since the introduction of the euro at the level of financial markets, market infrastructures and financial institutions. progress has however differed considerably across market segments. the euro area money market has been strongly integrated since the introduction of the single currency, supported by the integrated market infrastructure for large - value payments. as to the wholesale banking segment, there are clear indications of strong progress in financial integration as well. for example, the

last december. in april we will discuss these policy initiatives in order to assess their adequacy and consider possible further progress. in this context, i would like to emphasise a few elements which i regard as important in the process of enhancing the eu financial stability arrangements. first, concerning the general objectives of this process, i would argue that, while the primary objective of the eu financial stability framework should evidently be to safeguard effectively financial stability, it should also contribute to removing the remaining obstacles to financial integration. this mainly requires identifying and reducing to a minimum the existing divergences in national laws and also in supervisory requirements and practices, which still hinder the effective functioning of the single financial market. whereas since the inception of the lamfalussy framework there has been good progress in regulatory and supervisory convergence in the eu, further measures are necessary on ( i ) the harmonisation of regulatory requirements at the eu level, also through the elimination of the so - called “ goldplating ”, namely the addition by member states of unnecessary national layers to eu regulation, and ( ii ) the consistent implementation of the supervisory requirements, agreed by level 3 committees, and the development of streamlined and coherent supervisory processes by national supervisors, with the support of level 3 committees. second, the improvement of the financial stability arrangements should build on the existing largely national responsibilities for financial stability, thus focusing on reinforcing the eu mechanisms for cross - border co - ordination and co - operation between the responsible authorities. in this respect, the lamfalussy framework provides the appropriate institutional setting. one of its key advantages is the combination of a decentralised set - up of responsibilities for financial stability with the co - ordination mechanisms provided by the level 3 committees. a decentralised approach allows drawing on the advantages of geographical proximity and of the established experience and knowledge of local authorities. however, in order to be effective, this approach requires the significant reinforcement of the role and operating mechanisms of level 3 committees so as to achieve the required high level of cross - border convergence, co - operation and information - sharing among national supervisory authorities. third, concerning the crisis prevention leg of the eu financial stability framework, it is crucial to ensure a smooth interplay between central banks and banking supervisors in order to ensure that potential threats to eu systemic stability are detected at an early stage and dealt with in a prompt and co - ordinated manner. appropriate sharing of information and assessments between central banks and supervisors is needed to detect and evaluate potential