build - up of risks in this part of the economy, typically less regulated and lacking information. this brings me back to the importance of an effective macro - prudential supervision and regulation, i. e. one that considers all systemically important financial entities and activities. improving the macro - prudential framework in order to make cmu a success with stronger capital markets and deeper cross - border financial integration in bank - and market - based financing, we need to further strengthen the european macro - prudential framework. the current framework focuses on the banking sector. with regard to the bank - based tools, our experience at the financial stability committee revealed that even the instruments in the crr / crdiv framework are not homogeneously implemented at the eu level. 21 some of the shortcomings can be addressed through the continuous exchange between national authorities and the ecb, but other aspects require legal changes in the ssm regulation and in the crr / crdiv framework. these legal changes also involve complementing the toolkit available at the european level with additional instruments. limits to the loan - to - value ( ltv ) or debt service - to - income ( dti ) ratios – currently under national for example, the relative sequencing of capital requirements between pillar 1 and pillar 2 measures is not always consistently reflected in the legal texts. in some cases such as for art 133 crd iv, art 458 crr, the sequencing of the measures implies the requirement to consider the implementation of pillar 2 ahead of pillar 1 measures. some overlaps also exist between instruments, especially between the systemic risk buffer and the one for other systemically important institutions ( o - sii ). bis central bankers ’ speeches legislation – do have cross - border implications and their effectiveness would be strengthened if made available to the ecb. if applied incoherently, they can distort the single market, obstruct financial integration and weaken financial stability. progress on these issues will be made once the european commission report on the revision of the macro - prudential regulatory framework for consultation is available. however, to safeguard financial stability in a financially integrated monetary union, the instruments for the banking sector are not enough. in fact, as i explained, cmu will ease the flow of capital among euro area countries. providing macro - prudential authorities with the tools to deal with systemic risks in market - based entities and activities is therefore of utmost importance. currently, the ecb can only

shown that the ecb is among the most predictable central banks in the world. in the interests of transparency, we regularly explain our policy framework and actions to the people of europe, their elected representatives – namely the european parliament – professionals in the financial markets and the media. indeed, the ecb was the first major central bank to introduce a public display of its diagnosis and overall assessment immediately after the meetings of the governing council via a regular monthly press conference immediately after the announcement of its monetary policy decisions. credibility is the third principle that i would like to emphasise as underlying the success of the single monetary policy. a high degree of credibility is essential to the ability of a central bank to guide expectations about future inflation and interest rates. in a market - based economy, the central bank can directly influence short - term interest rates through its monetary policy instruments. consumption and investment decisions, and thus medium - term price developments, are also to a large extent influenced by longer - term interest rates, which depend largely on private expectations regarding future central bank decisions and future inflation. it is important that developments in longer - term rates support the objective of maintaining price stability over the medium term. how do these three elements come together to contribute to the successful conduct of monetary policy for the euro area? let me illustrate by using an example from our recent experience. over the past few years, the euro area has witnessed a gradual recovery in economic activity that has now led to real gdp growth rates that are close to our present estimates of the potential growth rate of the euro area economy. however, over the same time period headline annual hicp inflation in the euro area has remained at rates just above 2 %, mainly as a result of the strong increases in energy prices. indeed, oil prices have surged from around usd 30 per barrel at the beginning of 2004 to an average of usd 71 per barrel in april 2006. in the past, prior to the single monetary policy, such large increases in energy prices led to substantial lasting rises in headline inflation stemming largely from second - round effects in wage and price - setting behaviour, which have their origin in a dis - anchoring of inflation expectations. in the most recent period, such second - round effects have not emerged. indeed, one of the successes of the single monetary policy in the recent past has been the effective anchoring of inflation expectations at levels consistent with price stability, despite the surge in oil prices and a number of other inflationary shocks. all available measures of long - term