strengthen the ties between home and host country supervisors and foster the coordinating role of home - country supervisors. ( ii ) the european commission has launched an initiative to eliminate existing barriers to cross - border mergers with consequences for the supervisory approval process as well as home and host - country interactions. ( iii ) finally, reflecting the need for timely cooperation between several players in times of stress, a memorandum of understanding involving banking supervisors, central banks, and finance ministries in the eu was signed in 2005. the details of some of these plans are not uncontroversial and will need further clarification, but the overarching goal is unequivocally positive : to improve the functioning of european cross - border banking markets. some of you may still argue that the current institutional setting is too complex and burdensome. but, given the current european banking landscape, it is, in my view, an appropriate institutional configuration. nevertheless, it clearly has to be constantly adapted to changes in the markets : the guiding principle should be that the structure of banking supervision follows the market structures. it should neither lead them nor lag behind them. concluding remarks let me conclude by summarising the main points. financial integration is a mostly beneficial process which is driven by market forces as well as collective action and public action. the current state of financial integration varies across the various market segments, with integration being most advanced in those areas where the relevant market is closest to the common monetary policy. thus, a large measure of integration has been achieved on the money market and the bond markets. a lower degree of integration has been achieved on the equity markets and the banking markets. european cross - border banking is still underdeveloped ; there is still a lack of pan - european banks. the banking business itself is under the pressure of a general trend towards a more market - based financial system, but the financial systems of the euro area countries will certainly stay bank - oriented for the foreseeable future. loans will remain the dominant financial instrument for small and mediumsized enterprises, but capital market products will gain a more important supplementary role in corporate finance. even those enterprises with no access to capital markets will be affected indirectly owing to the emergence of credit risk securitisation and credit derivatives. banks will become knowledge providers in the increasingly complex securities and financial markets. in such a symbiosis with the capital market, even relationship banking might gain new attractiveness. as regards the monetary policy implications of this process, it

back on their feet again in the autumn of last year. with that i mean an exit from both the extremely expansionary orientation of monetary policy and the various non - standard measures, as these can entail risks for price stability if we wait too long to scale them back. as you can see, we are walking on very thin ice. this is why monetary policy has to perform a kind of balancing act : on the one hand, it has to swiftly counter any risks to price stability, but at the same time it must ensure that no new turbulence is triggered on the financial markets when scaling back its non - standard monetary policy measures. the bundesbank ’ s overarching mandate cannot be seen in isolation from the stability of the financial system, as financial stability is an important prerequisite for price stability. distortions on the financial markets can have an impact on monetary policy, either directly or indirectly, by substantially dampening economic momentum and growth. financial market crises make it more difficult for monetary policymakers to maintain price stability. the main reason why the stability of the financial system is so important is because financial crises cause substantial damage to the real economy, too. this was clearly illustrated by the recent financial crisis. the panic in the financial markets following the insolvency of lehman brothers spilled over to the real economy at an incredible speed. the global economy plunged into the most serious crisis since the second world war. there were even fears of a prolonged depression just like 80 years ago. fortunately, today we do not need the comfort of mark twain who betimes realised, that only “ education remains when the last dollar is gone ”. it is therefore essential that the financial markets are better and more stringently regulated in future – although “ regulation ” should not be confused with “ strangulation ” – and that the financial system becomes more resilient on the whole. the central banks will play an important role in safeguarding the stability of the financial system ; the primary objective of monetary policy, however, will still be to maintain price stability. this is what the bundesbank and the european central bank stand for. ladies and gentlemen, i hope i was able to spark your interest in central banking topics. topics which are of interest to members of staff of one central bank may also be of interest to members of staff of other central banks. this is why selected seminars should be packaged and also offered to other central banks as a collective further education programme. the opening up of seminars to