further discourage normal intermediation. the impairment in the transmission from risk - free rates to sovereign yields is compounded in a heterogeneous monetary union such as the euro area, where market stress gives rise to the risk of fragmentation across countries and market segments. on the whole, only arbitrage between the ois and the bund has remained intact, while it has not worked smoothly between the ois and other sovereign yields. this disconnect is largely a euro area phenomenon, reflecting high cross - border substitutability in https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp200624 ~ d102335222. en. html 4 / 13 7 / 15 / 2020 the ecb ’ s monetary policy response to the pandemic : liquidity, stabilisation and supporting the recovery the absence of currency risks. by way of contrast, this has not happened in the united states, which helps explain the milder correction in financial conditions on the other side of the atlantic. chart 5 drivers of euro area and us sovereign yields ( percentage points ) source : ecb calculations. the pandemic emergency purchase programme ( pepp ) that we announced in march 2020 has been instrumental in unlocking the transmission mechanism to ease financial conditions for all sectors in the economy. the announcement of the programme was followed by a more pronounced decline in the gdpweighted sovereign yield than the concomitant decrease in the ois rates, which indicates that the pepp has been successful in diminishing the intermediation frictions that arose in the early stages of the crisis ( chart 5 ). notably, the recently - announced expansion in the pepp has been associated with a further improvement in the transmission mechanism. these developments show that the pepp has been very effective against the widening of risk premia, consistent with evidence that monetary policy measures designed to release balance sheet constraints for firms and financial intermediaries tend to be particularly effective in conditions of elevated market stress. the extraction of duration risk from the financial system is a key channel through which the pepp supports market stabilisation. by putting downward pressure on the medium and long segments of the curve, it complements and reinforces negative interest rates and forward guidance on rates. the total pepp envelope of €1, 350 billion, in conjunction with the additional €120 billion app purchase envelope for 2020, is expected to

are dealing with it bank by bank. but there are some issues which will affect the entire sector and we have to deal with these as well. think of clearing. the clearing of derivatives in uk ccps is crucial for euro area banks. but a nodeal brexit could mean that they will lose access to these services. for that eventuality, the european commission now plans to take temporary measures to preserve access to uk ccps. this is certainly good news. however, these measures are just a stopgap, and banks must make sure that they are prepared for what happens next. so, there is no time to relax ; there is just a little more time to prepare. the market for central clearing is highly concentrated. this may be positive in terms of the efficiency of central clearing. but we need to ask at what point these gains in efficiency may be accompanied by risks for individual banks, as well as for financial stability. and we need to start a discussion about how to mitigate these risks. or to put it more bluntly : as supervisors, do we want big banks to rely on a single ccp for important asset classes? but brexit does not just affect the banks, of course. it also affects regulation and supervision, and these will have to adapt too. european banking supervisors have worked hard to prepare for brexit. but whatever we do must be rooted in the existing regulatory framework. and that framework is still fragmented. this is certainly not ideal, particularly when it comes to supervising globally active banks. for one thing, the ecb still lacks the powers to directly supervise the provision of cross - border banking services. national authorities have some powers in this area, but their reach is limited too, and it varies from country to country. this is a problem. a number of global banks, located outside the eu, currently access eu markets via the united kingdom. after brexit they will have to find new ways of entering the eu. they might set up subsidiaries in the eu, but they might also set up branches or provide services directly from non - eu countries, or third countries, as we call them. i ’ m fine with subsidiaries, because european banking supervision would cover them. i have concerns when it comes to the rest, though. ecb banking supervision does not cover third - country branches or services provided directly from third countries – even if they are 2 / 5 bis central bankers'speeches material. it is true, of course, that