luis maximo dos santos : closing address - bank of portugal legal seminar closing address by mr luis maximo dos santos, vice - governor of the bank of portugal, at the bank of portugal legal seminar, lisbon, 3 december 2018. * * * allow me to begin my closing address by thanking the speakers for accepting banco de portugal ’ s invitation. their addresses have helped this seminar achieve its objective : to be a time of reflection, at the highest level, on the reform of the economic and monetary union ( emu ) at a critical time for the future of the european union. two words of thanks are due : to the minister for foreign affairs for making time in his schedule to share with us his stimulating reflections ; and to professor jean - victor louis, who has honoured us with his presence as keynote speaker. i have long admired professor jean - victor louis, whose work on european law – in particular on the emu and the external relations of the european union – has inspired several generations of scholars, impressed by its depth and clarity. consulting his work has always been instrumental in shining a light on the complex – and at times even somewhat tortuous – world of community law initially and then of european union law, following the maastricht treaty. in addition to his exceptional academic work, professor jean - victor louis has been a key player in the development of the emu as head of the legal service of banque nationale de belgique, a post which he still holds today in an honorary capacity. on behalf of banco de portugal, thank you very much for being here. i would also like to thank all those who agreed to join this seminar, on such a key issue for our country and for the whole of europe. last but not least, i am grateful to all who, at banco de portugal, and in particular in the legal services department, have made this event a reality in a very short period of time. 1. the european central bank ( ecb ) was established on 1 june 1998, after the european council unanimously decided, on 2 may 1998, that 11 member states, including portugal, met the requirements necessary to adopt the single currency on 1 january 1999. the ecb replaced the european monetary institute ( emi ), which had marked the beginning of the so - called second stage of the emu when it was created on 1 january 1994. this seminar was also a way for banco de portugal to celebrate the twentieth anniversary both of the ecb and of banco

markets ’ risk perception led to financial fragmentation in the euro area, which affected not only the most vulnerable economies via an inability to access external financing, but also the monetary policy transmission mechanism itself, and, consequently, the emu. the fragilities brought to light by the emu framework made its deepening inevitable, which over the past few years has resulted in : • the strengthening of fiscal discipline mechanisms, with the adoption of the fiscal compact, the six - pack and the two - pack, and the establishment of the european semester as an annual cycle for policy coordination in the eu ; • the establishment of mechanisms to prevent the build - up of imbalances impacting on the competitive position of euro area countries ( the so - called macroeconomic imbalances procedure ) ; bis central bankers ’ speeches • the creation of a banking union, with the purpose of breaking the bank - sovereign nexus, which was behind the severity of the euro area crisis ; • the establishment of a common mechanism for last - resort lending subject to conditionality ( european stability mechanism ). where we stand : a banking union under construction today, we stand on undeniably stronger ground than we did before the onset of the international financial crisis, but which is still insufficient to break the bank - sovereign nexus and safeguard the existence of a genuine european financial market. the remaining shortcomings result mostly from three factors : first, the banking union, which is composed of three pillars, is still institutionally incomplete. we have : • a single supervisory mechanism, which has been the single supervisory authority since november 2014 ; • a single resolution mechanism, invested with resolution authority powers since 1 january 2016, but still subject to the limited funding capacity of the european resolution fund ; • the intention, agreed but yet to be implemented, to establish a common deposit guarantee scheme. second, europe lacks as yet a network of large banks established across all territories, as country - based banking systems are still predominant. institutions tend to have a limited presence at eu level, while having systemic importance in the territory where their business is concentrated. this stands in contrast to what is seen, for instance, in the united states, where large banks with reach across the country coexist with small local banks, which are not systemic in nature. in the current framework of a banking union still under construction, national authorities continue to be responsible for national financial stability, i. e. they continue to be responsible – and therefore accountable – for the safeguarding of depositors