3 second, sound banks have ensured that major shocks have not disrupted the effectiveness of monetary policy. both when we eased policy to avert deflation during the pandemic and when we raised rates rapidly to combat inflation after the pandemic, the banks enabled our policy impulses to be transmitted smoothly across the euro area. but we must also recognise that these stability - oriented goals, which arose from the conditions that led to the banking union agenda, are not ends in themselves. they are merely the foundation. our ultimate aim is for banks to be sound and for the policy framework to be complete, so that they can safely tap into resources from across the euro area and use them to fund innovation, investment and growth. and it is on this particular objective that europe is falling short in the transformative era we are living in today. we are facing a quadruple challenge : decarbonisation, deglobalisation, digitalisation and decoupling. these forces are putting our competitiveness and strategic autonomy to the test. to emerge stronger, we need massive investment in both physical and human capital. in the eu, an additional €5. 4 trillion will be needed between 2025 and 2031 to advance the green transformation, accelerate the digitalisation of our economy and bolster our military defence capabilities. 4 i have argued previously, and will continue to argue, that deepening europe's capital markets will be essential for this monumental task. 5 but this is no threat to banks, as they have a vital role to play, too. the benefits of truly european banks there are two main ways we can make sure banks contribute. first, we can strengthen banks'intermediation capacity by building a more integrated banking sector. currently, only two banks incorporated in the euro area rank among the ten largest banks in the world, holding the eighth and tenth positions. 6 moreover, on average, the cross - border exposure of euro area banks is more than one - third higher outside the euro area than within it. 7 this fragmentation makes it more difficult for our banks to serve the european economy effectively. and the obstacles to cross - border banking are substantial. 2 / 4 bis - central bankers'speeches therefore, we need to create a single jurisdiction for banks – one that is essentially " country blind " in terms of its regulatory, supervisory and crisis management frameworks. for example, reducing the ring - fencing of capital and liquidity along national lines would allow funds to flow freely within banking

comparison and the benefits would be smaller. so there is a strong case for proportionality. looking at the european situation, the eu ’ s single rulebook already provides for such proportionality in many cases. for instance, reporting requirements for small banks are far less stringent than those for large banks : small banks have to report about 600 data points to supervisors, whereas larger banks have to report more than 40, 000. the question is whether more proportionality in banking regulation is needed? 1 / 2 bis central bankers'speeches indeed, the discussion in europe is currently focusing on changes in several additional areas which will enable banks to apply simpler rules and thus reduce compliance costs for smaller banks : one proposal focuses on the capital requirement rules for market and counterparty credit risk. banks with small trading books below €50 million could be exempted from the obligation to have a prudential trading book. this would enable them to use the simpler credit risk framework. banks with trading books below €300 million could use a simpler standardised approach to calculate market risk. similarly, in the field of counterparty credit risk, banks with small derivative portfolios might be able to use a simpler standardised approach to calculate capital requirements. another proposal looks at reducing the regulatory burden of small banks by softening reporting requirements. some of the proposals discussed involve reducing the number of data points to be reported by using simplified templates and less granular data. less convincing are proposals which involve less frequent reporting. this would not result in cost savings, as banks would still have to invest in setting up reporting structures. but it would mean that supervisors would have to work with outdated information. there are also suggestions to reduce the disclosure obligations for small banks, in particular non - listed ones. this would significantly reduce their administrative burden. and there are proposals to exempt smaller banks from some remuneration rules – something that is worth discussing. a great many proposals have been put forward altogether – i will refrain from listing them all. the critical question is : what do we want to achieve through the proportional regulation and supervision of small banks? would it mean that these banks could hold less capital, less liquidity? in my opinion, proportionality means simpler rules for smaller banks. but it does not mean that the rules should be generally less stringent, or that banks can hold less capital or liquidity. finally, a crucial issue is where to draw the line between small and large banks. depending on the objectives of proportionality, the line