our work is not yet finished. high unemployment and financial fragmentation both remain a chief concern. the unemployment rate, currently at around 12 %, remains unacceptably high. market sentiment also remains fragile. to use an analogy, the needle of market sentiment has shifted from fear to caution. now we need to move the needle from caution to confidence. and the way to do that is by avoiding any relapse in the progress made so far, and by moving forward towards a genuine emu. bringing our banking system back to health is an essential precondition for restoring growth. it is against this background that in my remarks today, i would like to focus on a key pillar of a genuine emu, that is the banking union. i will try to answer three questions. what are the necessary components of a banking union? what does a banking union mean for countries inside the euro area and those outside, like sweden and the home country of today ’ s host, denmark? and is a banking union sufficient to kick - start bank lending and consolidate the recovery? bis central bankers ’ speeches elements of a banking union let me start with my first question. what are the necessary components of a banking union? to our mind, a banking union requires a single supervisory mechanism ( ssm ) and a single resolution mechanism ( srm ). the single supervisory mechanism a lot of progress has been made on the ssm. last month, the eu legislature gave the final green light to the regulation. the entry into force of the regulation has allowed us, the ecb, to speed up our internal preparations. we recently communicated on the comprehensive assessment that we will undertake in the run - up to the actual assumption of supervisory tasks, twelve months from now. in a way, this comprehensive assessment is the “ founding act ” of the ssm. and we are very much aware of the conventional wisdom that “ there is no second chance to make a good first impression ”. so we are adamant that this comprehensive assessment needs to be thorough, credible, and transparent. we are intent to not only shed light on the potential weaknesses in banks ’ balance sheets, but we will also prescribe the necessary corrective actions that need to be undertaken. after all, there is no point in making the right diagnosis, if you don ’ t apply the remedy and cure the disease. if you read some press reports, one could get the impression that the euro area banking sector is terminally ill. this is not the case

are blended with a heloc component. helocs have been a very convenient tool for many households. they give borrowers flexibility to finance renovation projects or handle emergencies — such as when your furnace dies on a cold february night. their popularity shows how useful these lending arrangements are. however, there are some potential risks that borrowers need to manage. helocs usually allow the borrower to pay only the interest on the loan each month, leaving the principal amount unchanged. indeed, about 40 per cent of heloc borrowers are not regularly paying down their principal, which means that debt loads may persist longer than in the past. furthermore, some may be using their heloc to speculate — for example, to fund a down payment on a second house with the intention of flipping it. given the potential for volatility in house prices and for higher interest rates, such activity may be adding to the overall vulnerability of the system. we have seen several rounds of macroprudential measures to tighten mortgage finance rules. these include measures last year that were aimed at high - ratio mortgages — those where the down payment is less than 20 per cent of the value of the home. since then, there has been a sharp drop in the number of highly indebted canadians obtaining these mortgages — and by highly - indebted we have in mind people with a ratio of debt to income that is more than 450 per cent. but we have also seen an increase in low - ratio mortgages with risky characteristics, such as extended amortization periods. new lending guidelines for low - ratio mortgages, which will come into effect next year, should work to limit the number of low - ratio mortgages going to highly indebted households. these mortgage rule changes will help build up the resilience of the financial system over time, as each new mortgage will be stress - tested to ensure that the borrower can manage a higher interest rate at renewal time. it is important to remember that the purpose of these rule changes is not to control house prices. ultimately, the laws of supply and demand will determine the direction of house prices. at the same time, there is little doubt that these rule changes will mean less growth in our housing sector. in the wake of the global financial crisis, ultra - low interest rates have helped our economies weather the storm, but an important by - product has been exceptional growth in housing. for some time now we have been expecting a rotation