probably have some interesting implications for competition in banking and the operating conditions of the banking sector. banks will find that the ssm brings benefits in the form of reduced administrative costs and increased certainty and commonality in supervisory practices. • even within such a closely integrated region as the nordic, there are still differences in the supervisory practices. without the ssm, this generates uncertainty and additional administrative costs. banks in the ssm can benefit from uniform supervisory practices and the single entry point to authorities, which should reduce the supervisory burden on cross - border banking groups, including reporting costs. it will also provide additional assurance of a level playing field across the banking market. • participating in the ssm may also mean easier conduct of cross - border mergers and acquisitions as supervisory decisions and approvals on such transactions are centralised at the ecb. • with the creation of a banking union, it might also be that the idea of the european corporation, which was discussed some 5 to 10 years ago, and some nordic banks bis central bankers ’ speeches were contemplating, will revive. this would have implications in particular for the operational efficiency of cross - border banks. the unified supervision and the resolution tools of the srm in particular may have some impact on funding costs. • while the net impact of the banking union on the banks ’ funding costs is less straight - forward to assess, the benefits of better credibility of supervision and eventually also of a larger pool of resources for crisis resolution would be positive for banks. cutting the bank - sovereign linkage of creditworthiness, which is the aim of the banking union, would be important for banks based in countries where government finances are weak. • however, the net impact on the funding costs of banks will depend on how much of the implicit government guarantee remains. within the banking union, large crossborder banks are likely not able to continue to enjoy their too - big - to - fail status. this will correct the artificially low funding costs that these banks enjoy. in countries outside the banking union, where there will be no pooling of resources to alleviate the too - big - to - fail problem, systemically important banks will likely continue to have lower funding costs than less significant banks. there are reasons why the banking union may have an impact on the market value of banks. • the increased confidence in banks based in countries participating in the banking union may increase investors ’ interest in them, thus facilitating their funding. • the core factor is a credible assessment of bank balance sheets.

positive deviations from the 2 % target to be equally undesirable. [ slide # 7 dramatic shift in operational environment – inflation surge ] after the completion of our strategy review, the speed of change in the operating environment has been accelerating. it was still less than a year ago, i recall, that some commentators were sceptical about whether the eurozone would ever pull away from the low - inflation era – there was talk about “ japanification ”. we don ’ t hear such talk too much anymore! in the current context, the risk of deflation has vanished, but we face another challenge in preventing inflation expectations from becoming de - anchored. indicators of underlying core inflation have been rising rapidly this year, and inflation expectations have been shifting upwards. that is why the ecb ’ s first interest rate hike in over a decade will take place soon. and that was indeed the message we conveyed after the ecb monetary policy meeting on june 9th. the end of net purchases under the ecb ’ s app asset purchase programme on july 1st paves the way for a rate lift - off at our next rate - setting meeting in july, in line with our forward guidance. based on the current outlook, we are likely to be able to exit negative territory in interest rates by the end of the third quarter. in our policy analysis, we need to be mindful of the pervasive uncertainty surrounding the global economy. supply shocks that are raising inflation and slowing growth do call for a well calibrated policy normalisation. monetary policy cannot do much about rising energy prices, but it can influence inflation expectations to stay anchored around the target. that is, we – the central banks – have the means to maintain price stability, and as shown earlier this week by the fed, we clearly have the will to do so. before concluding, let me briefly comment on the risk of financial fragmentation in the eurozone. flexibility in the conduct of asset purchases has helped us counter any impaired transmission of monetary policy. this was demonstrated by the pepp programme during the pandemic. and flexibility will firmly remain in our policy toolbox. the reinvestment capacity that we have under the pepp today totals 1. 7 trillion euros. as decided by the governing council on wednesday, it will be reinvested in a flexible manner across time, across jurisdictions, and across products. moreover, we decided to accelerate the completion of the design of a new antifragmentation instrument for consideration by the governing