, signal a continuation of the very gradual recovery in the second quarter of 2014. looking ahead, domestic demand should be supported by a number of factors, including the further accommodation in the monetary policy stance and the ongoing improvements in financing conditions. in addition, the progress made in fiscal consolidation and structural reforms, as well as gains in real disposable income, should make a positive contribution to economic growth. furthermore, demand for exports should benefit from the ongoing global recovery. however, although labour markets have shown some further signs of improvement, unemployment remains high in the euro area and, overall, unutilised capacity continues to be sizeable. moreover, the annual rate of change of mfi loans to the private sector remained negative in may and the necessary balance sheet adjustments in the public and private sectors are likely to continue to dampen the pace of the economic recovery. the risks surrounding the economic outlook for the euro area remain on the downside. in particular, geopolitical risks, as well as developments in emerging market economies and global financial markets, may have the potential to affect economic conditions negatively, including through effects on energy prices and global demand for euro area products. a further downside risk relates to insufficient structural reforms in euro area countries, as well as weaker than expected domestic demand. bis central bankers ’ speeches according to eurostat ’ s flash estimate, euro area annual hicp inflation was 0. 5 % in june 2014, unchanged from may. among the main components, services price inflation increased from 1. 1 % in may to 1. 3 % in june, while food price inflation fell from 0. 1 % to – 0. 2 %. on the basis of current information, annual hicp inflation is expected to remain at low levels over the coming months, before increasing gradually during 2015 and 2016. meanwhile, inflation expectations for the euro area over the medium to long term continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2 %. the governing council sees both upside and downside risks to the outlook for price developments as limited and broadly balanced over the medium term. in this context, we will closely monitor the possible repercussions of geopolitical risks and exchange rate developments. turning to the monetary analysis, data for may 2014 continue to point to subdued underlying growth in broad money ( m3 ). annual growth in m3 was 1. 0 % in may, compared with 0. 7 % in april. the growth of the

benoit cœure : challenges facing financial integration and financial stability speech by mr benoit cœure, member of the executive board of the european central bank, at the 3rd pan - asian regulatory summit, organised by thomson reuters, hong kong, 28 november 2012. * * * ladies and gentlemen, it is a great pleasure to be here in hong kong and i would like to take the opportunity to thank thomson reuters for having invited me to speak at the 3rd pan - asian regulatory summit. today i would like to focus on three closely interrelated issues : first, i ’ ll discuss some key questions related to financial integration and financial stability, and second, i ’ ll touch upon the nexus between financial integration and financial stability on the one hand, and monetary policy on the other hand, highlighting some key challenges that the ecb faces today. i ’ ll conclude my talk with some general remarks on the global perspective on financial regulatory reform. financial stability and financial integration policy debates on the relationship between financial stability and financial integration have intensified in the past few years and the topic has become a high priority on the research agendas of central banks and academia. the increased attention is justified on account of recent experiences in the financial crisis which provided ample evidence of how quickly financial distress can spread from one institution to another, or from one financial system to another, in today ’ s globally integrated financial markets. several jurisdictions reacted to these developments by “ ring - fencing ” certain institutions or business lines. at the same time, financial institutions were also keen to lower their cross - border exposures in order to reduce the riskiness of their portfolios abroad. these efforts resulted in increased market fragmentation, in particular in europe, with adverse consequences on monetary policy and financial intermediation. there is now a consensus that a financial system which is stable across jurisdictions can foster financial integration. as the ecb ’ s most recent financial integration in europe report indicated, stable, highly integrated and adequately supervised markets contribute to a more efficient allocation of resources over time and across jurisdictions, allow inter - temporal smoothing of consumption and increase the supply of funds for profitable investment opportunities. furthermore, higher levels of financial integration also enhance competition and reduce the costs of intermediation, thus contributing to more sustainable economic growth. naturally, the question arises whether this positive reinforcing relationship between financial stability and financial integration also works the other way around – i. e. does financial integration also enhance financial stability? my answer to this question is yes, provided that certain