loss absorption capacity even in adverse circumstances. supporting the european regulatory effort let me now turn to the important role of regulation. in europe, banks are strong today because we have applied the basel regulatory framework to all eu banks. indeed, recent events in other regions have shown just how important it is to have an adequate framework in place for all types of banks. looking ahead, let me highlight three key takeaways that should guide the european regulatory effort. first, the eu needs to fully implement the final outstanding elements of basel iii. we call on co - legislators to support the resilience of the banking sector by implementing these faithfully and without delay. 3 / 4 bis - central bankers'speeches second, we need to complete the banking union. a month ago, the european commission tabled a legislative proposal that will improve how we manage crises affecting mid - sized and smaller banks. this is very welcome, and we hope the legislators will rapidly adopt the proposal. but if we are serious about completing the banking union, we also need to tackle some more ambitious elements : namely, the european deposit insurance scheme ( edis ) and a european framework for providing liquidity to banks in resolution. both of these would further strengthen the resilience of our crisis management framework and should therefore be a top priority for legislators. and third : we need to see further progress on the capital markets union ( cmu ). creating deeper and more integrated capital markets in the eu will provide firms with additional funding sources as alternatives or complements to bank credit. implementing the commission's cmu action plan in full within this legislative cycle should remain one of europe's key goals. conclusion let me conclude. since the emergence of market tensions in march, banking sector risks have come back into the spotlight. we have seen just how rapidly financial market sentiment can change and how confidence in the banking sector can weaken substantially. but euro area banks are weathering the storm. this is in large part due to their solid capital and liquidity positions. we should not be complacent, however. vulnerabilities persist, and we need to closely monitor the situation to safeguard financial stability. the recent market turbulence demonstrates the importance of implementing our banking regulatory framework in full. at the same time, macroprudential policy continues to play a vital role in ensuring the resilience of the system by maintaining or strengthening buffers. if anything, the financial stability concerns raised by recent market tensions revealed that the incomplete banking union

jean - claude trichet : interview in la repubblica interview with mr jean - claude trichet, president of the european central bank, in la repubblica, italy, conducted by ms elena polidori on 16 june 2010 and published on 24 june 2010. * * * mr president, you always get angry about governments ’ lack of discipline in terms of managing public finances. now, after the case of greece and the speculation that followed, many countries – including italy – have taken measures. are the steps that have been taken correct? are they sufficient? “ the delicacy of the current situation requires credible measures, this is very important. it is necessary in order to correct divergent paths. sustainable fiscal policies will help to consolidate the recovery. governments have solemnly stated that they are aware of this need, and have decided to bring forward consolidation measures. but the credibility of their measures will be subject to constant scrutiny. ” are you saying that you will monitoring them? “ that is the task of the european commission, in liaison with the ecb. we are very attentive in this respect. ” italy has also launched a fiscal adjustment package, which is, however, half the size of the packages of france and germany. is it enough? or will a further package be needed shortly? “ the measures taken on 25 may go in the right direction, namely they underpin the stability programme of the country. we are reviewing the situation at this stage and attach importance to the assessment of the commission, taking into account its treaty responsibility to monitor, evaluate and make recommendations to the council. ” but the commission has already given its preliminary assessment. “ to my knowledge, the package has not yet been assessed in detail. as i said, the italian measures go in the right direction, underpinning the stability programme. ” the italian plan is lacking measures with regard to growth and employment. are these not important? do you have any suggestions for the government? “ we call upon all governments, not just the italian government, to show determination in making structural reforms to increase potential growth. i place great emphasis on the need to increase labour productivity, for in the medium and long term, growth is dependent on this very factor. and that is why we say that this is a crucial reform for all countries, and italy as well. ” one cut after another : many economists say that there is a clear risk of deflation. what are your views on this? “ i don