dominant. 2 finally, in view of the cross - country differences in asset allocations even within the euro area monetary policy may affect pension fund asset returns in diverse ways across the euro area countries. that being said, a credible and stability - oriented monetary policy focused on preserving price stability over the medium to longer - term is nonetheless the central bank ’ s most important contribution to ensure that pension funds accomplish stable and predictable returns on their investments and maintain their crucial role as an important source of funding for the rest of the financial sector. however, policy makers should also be aware of the potential interactions between the development of the pension fund sector and the monetary policy transmission mechanism. this is the subject to which i now turn. changes to the monetary transmission mechanism and implications for monetary policy in light of the changes to the financial system brought forward by the growing importance of institutional investors, and the pension fund sector in particular, let me now turn to some of the implications for monetary policy. in terms of the effect of institutional investors on the monetary policy transmission mechanism, it may be recalled that monetary policy affects asset prices via the effect of changes in the policy rates on the yields on asset prices. furthermore, changes in monetary policy may affect the risk perceptions of market participants, which will also feed into the pricing of financial assets. changes in asset prices will in turn ( via wealth effects ) affect the saving and spending behaviour of economic agents. furthermore, financial innovation, for example in the form of new credit risk transfer products, created more investment opportunities for all market participants. this may have induced a more risk - taking investment behaviour and may have amplified asset price developments by see e. g. oecd ( 2008 ), survey of investment regulations of pension funds, july. oecd ( 2007 ), pension markets in focus, issue 4, november. the compression of risk premia. 3 against this background, the turmoil observed over the past year may to some extent reflect a re - pricing of risks. 4 in addition, it has been argued that the heightened importance of pension funds ( and other non - bank financial intermediaries ) has complicated the intermediation process. 5 in a sense one could say that the chain of intermediating funds between savers and investors has become longer and more complex than in the past. a practical implication of this development is that although banks remain key players in this process, central banks can no longer limit themselves to the analysis of the banking sector when trying to interpret monetary developments.

first place. that is why completing the banking union, embarking on a new economic convergence process towards more resilient economies and achieving a fiscal union that ensures both fiscal sustainability and fiscal stabilisation are all crucial to providing a long - term vision of where emu is heading. the commission package adopted three weeks ago is a first step in this direction. but more will need to follow. thank you for your attention, and i am now looking forward to your questions. bis central bankers ’ speeches