and capital to be more efficiently managed at the group level. and with the single supervisory mechanism ( ssm ) and the new resolution framework barriers to entry and exit into national markets are expected to fall. all this should meaningfully lower the cost of doing business for cross - border banks and increase efficiency in the sector. at the same time, a more integrated banking landscape implies greater risk - sharing within the sector, which should in turn support the stability of credit provision. cross - border integration entails greater geographical diversification. 11 and the local affiliates of crossborder banks are also less likely to be exposed to the kind of market funding dry - ups we saw during the crisis, as intragroup funding acts as a shock - absorber. 12 that said, we of course do not want to move from a situation of too low concentration towards a banking landscape dominated by large banks with excessive market power. recent research looking at the pre - crisis period suggests that where banks face limited competition in their domestic markets, financing constraints for smes are higher. moreover, the effect of bank market power on financing constraints increases in financial systems that are more bank dependent. 13 this underscores the general need, as i mentioned earlier, to create a more balanced financing mix between banks and capital markets. but it also points again to the particular importance of securitisation. with well - functioning securitisation markets some of the benefits of cross - border banks – for instance risk - sharing – can be replicated by having small, local banks originate - to - distribute loans while larger, global banks securitise and market them. in see for example anna kovner, james vickery, and lily zhou, “ do big banks have lower operating costs?, ” federal reserve bank of new york economic policy review, volume 20, no. 2, forthcoming. “ financial integration in europe ”, march 2007. in line with this, carletti, e., hartmann, p., and ongena, s. ( 2007 ), “ the economic impact of merger control : what is special about banking? ”, ecb working paper no 786, july, find empirical evidence that the opacity of national bank merger reviews entered elements of inefficiency in banking relative to non - financial corporate sectors. for a discussion on why retail bank integration may be a particularly attractive risk - sharing mechanism, see e. g. fecht, f., gruner

, h. p. and hartmann, p. ( 2007 ), “ welfare effects of financial integration, ” cepr discussion paper no. 6311. see for instance reinhardt, d. and riddiough, s. ( 2014 ), “ the two phases of cross - border banking flows ”, mimeo, bank of england. ryan, r., o ’ toole, c. and mccann, f. ( 2014 ), “ does bank market power affect sme financing constraints? ”, journal of banking and finance. bis central bankers ’ speeches other words, it creates the conditions for diversity and competition within the sector so that an optimal market structure can evolve. conclusion let me conclude. repairing bank lending channel after a major financial crisis is inevitably a long and difficult process. monetary policy has an important role to play, but the agenda is also broader : it involves supply and demand factors, and multiple aspects of national and european policy. the steps we have taken so far to strengthen the banking sector are necessary conditions for a stronger recovery in credit, and i am confident that we will see increasingly positive effects. but as banks transition to a new business environment, ensuring that they continue to have microeconomic incentives that coincide with our desired macroeconomic objectives is essential, as is developing a banking landscape that is sufficiently efficient and diversified to sustain credit supply. bis central bankers ’ speeches