market of the euro area has become fragmented. this is harmful as the euro area is a bank - based economy. around three quarters of firms ’ financing comes from banks. so if banks in some countries will not lend at reasonable interest rates, the consequences for the euro area economy are severe. although we see a decrease in fragmentation on the funding side, our very accommodative monetary policy stance is only partly passed on to the financing conditions faced by firms and households in some euro area countries. companies headquartered in stressed countries face worse borrowing conditions than equally risky competitors in non - stressed countries. and, within the same stressed economy, small and medium - sized enterprises ( smes ) suffer relatively more than large companies that have easier access to capital this is a stylised account of the intended aim of the various policies. in the empirical literature there is evidence, for instance, that a sizeable part of the effect of lsaps on long - term rates comes from affecting expectations regarding future short - term rates ( see m. bauer and g. rudebusch ( 2012 ), the signalling channel for federal reserve bond purchases, federal reserve bank of san francisco, working paper 2011 - 21 ). bis central bankers ’ speeches markets and are less dependent on the banking system. this is especially disconcerting given that smes account for about three quarters of euro area employment. our non - standard monetary policy measures have, therefore, the task of removing these stumbling blocks to ensure that our single monetary policy in fact reaches all parts of the euro area. this is crucial for fulfilling our mandate. beneath the surface : the root causes of the crisis in the euro area within the limits of our mandate we have acted with determination. our balance sheet has expanded substantially, to almost three times its pre - crisis size. while it has shrunk since its peak, the expansion is comparable to the increase in the balance sheet of the fed during the crisis. 3 tail risks have been largely removed from the pricing of euro area assets. financial fragmentation has been receding : banks in stressed countries have seen the deposits placed with them by euro area residents increasing by about 130 billion euro since august 2012, target2 balances of the national central banks in these countries have declined by more than 200 billion euro or about 20 % since their peak and also banks ’ dependence on ecb liquidity intermediation is waning to some extent. nevertheless, problems in the euro area economic landscape still loom large. this understand

and security of retail payments remain of vital interest to market participants and authorities alike. the secure pay forum published its recommendations for improving the security of internet payments in january 2013, and it recently published its “ public note on security of payment account access services ”. 6. the creation of the euro retail payments board ( erpb ) by the ecb ’ s governing council is another step taken by the eurosystem to foster an integrated, innovative and competitive market for retail payments in euro in the eu. the erpb will bring together representatives from both the supply and demand sides to identify strategic issues and work priorities, see “ iso 20022 financial services – universal financial industry message scheme ”. see http : / / www. ecb. europa. eu / pub / pdf / other / pubnote201403securitypaymentaccountaccessservicesen. pdf. bis central bankers ’ speeches including business practices, requirements and standards, and ensure they are addressed. the commission will participate as an observer. similar “ social dialogue ” bodies have already been set up and are successfully operating in several member states. the move to establish the erpb was very well received and its first meeting is scheduled for 16 may. finally, i would like to say a few words on virtual currency schemes. bitcoin is perhaps the most notable and topical of these, but certainly no longer the only one. many media commentators have been wondering what impact these currencies will have on retail payments and even on central banks. i agree that virtual currency schemes are an interesting phenomenon and should not be ignored or dismissed. the ecb was one of the first public authorities to see their potential and their risks and published a detailed analysis in 2012. 7 despite the overall rise in the value of bitcoin since the publication of the report and the media attention it is getting, our conclusions still seem to be valid, namely, that such currencies are not ( at least yet ) economically important. in europe, virtual currencies do not pose a risk to price stability or financial stability, but do pose a risk for users. however, this user risk is more related to speculative investments and consumer protection, and not necessarily to payments. nevertheless, we are closely following developments and keeping in touch with other authorities. all in all, we are living in a time of rapid change. it may well hold in store some novel and even unconventional challenges as we create the building blocks for