home - bias in portfolios. the result of these examinations could well entail greater standardisation of investment products. ucits could be a model here. the demand side of the equation involves enabling borrowers to access funds from marketbased sources. creating more diverse forms of borrowings will be part of the story. this could include forms of finance in which investors directly acquire assets, such as equity and bis central bankers ’ speeches corporate bonds, and indirect forms of finance in which banks and markets work together through securitisation markets to lend to the real economy. the us example is again useful here. despite the us having an equity market that is nearly twice as large as that of the eu as a proportion of gdp, the leverage of non - financial companies is only marginally higher in the us than in the eu. the reason is that the companies in the euro area, particularly smaller ones, have equity but issue a much smaller proportion of marketable quoted equities, instead relying heavily on non - marketable, unquoted shares. a more integrated capital market would provide deeper, more liquid equity markets in which a wide range of corporates could issue equity and risks could be shared more widely. more broadly, areas where reforms could improve borrowers access to market - based financing could include : public platforms, such as, “ mini - bond ” markets for smes, which have enjoyed some success in italy in particular ; pan - european private placement markets which channel funds directly from non - bank investors, such as, insurers and pension funds to mainly medium - sized companies ( currently only germany and france have private placement markets of any notable size ) and encouraging the emergence of simple, transparent and robust securitisation markets. 1 increasing the scale of cross border capital flows across europe brings benefits. but it is not without risks. one does not have to go back to where i started today – in the late 1950s – to find examples of the power of cross border flows to amplify crises when it all goes wrong. that is why they have to be built on the foundation of sustainable economic policies, good regulation and robust institutional structures. the nature of capital flows matters too. europe was not short of cross border flows before the crisis. but they were concentrated in interbank lending and in debt often held by highly leveraged investors. inter - bank lending can of course be a very dangerous way to share risks between economies, particularly if the banking system is highly leveraged.

framework that underpins the single market in financial services. i will give three examples. first, crd4, the eu ’ s prudential capital standard for banks, includes a number of important areas in which member states ’ prudential authorities can act to increase the capital of the banks for which they are responsible to deal with specific risks they face at the national level. the negotiations around this were not easy. but it was particularly important for the bank of england which, through the financial policy committee, is the uk ’ s macroprudential authority to have this flexibility to raise capital above the levels in the eu rules to address risks to uk financial stability. i would highlight two other points from crd4. first, the legislation also provides that when national authorities take action of this sort within their jurisdiction, it is reciprocated, with regard to that jurisdiction, by the authorities of other member states. second, there are proportionate protections in the legislation to ensure these flexibilities are used truly for prudential purposes and not abused by member states. second, the recently agreed bank recovery and resolution directive ( brrd ), which sets common eu rules including on state support for banks in resolution but allows for national flexibility in their application, aligned to national insolvency regimes, by national resolution authorities or in the banking union ’ s case, the new single resolution board. like crd4, the brrd reinforces financial stability by ensuring that the actions of national resolution authorities are recognised in other member states. i would single out another aspect of the brrd. it follows the international standard for resolution developed by the financial stability board – the “ key attributes of effective resolution regimes for financial institutions ”. there is a more general point here. the eu capital market and financial sector exists in a globally integrated market. it is in our economic interest for the eu to be as integrated as possible with that global market. as i have said, that market needs to be supported by properly implemented international standards. the eu and its member states need to play an active role in shaping those standards. and once international standards have been agreed, it is in the eu ’ s interest that it implements them – as in the brrd. this is of crucial importance to the uk and to the uk ’ s financial stability. the uk is the home to financial firms and infrastructure that are truly global in their reach and activity. while much bis central bankers ’ speeches of this activity involves the