companies have recently announced that they are reviewing their listing practices with the aim of reducing costs by cutting back on the number of exchanges in which they are listed. however, this development towards greater concentration does not necessarily mean that trading is concentrated only in a few exchanges. a possible pattern of development could also be for different stock exchanges to concentrate on specific types of companies ( “ blue - chips ”, specialised industries, small companies and new companies, for example ). in any case, the physical location of stock exchanges is becoming less relevant as screen - based trading with remote access is becoming more widely used. with regard to investor behaviour, an increasing number of equity market investors already appear to be taking positions on the equity market of the euro area from a sectoral rather than a national perspective. area - wide equity indices have been made available by various market participants, thus providing investors with opportunities to monitor area - wide equity positions as well as, in some instances, positions in area - wide industrial sectors. the fact that the euro area ( and eu ) equity markets are becoming more integrated, more liquid and deeper is good for market efficiency, and a more efficient allocation of capital should mean that equity financing becomes more readily available for companies. i should also like to mention that a prudent, harmonised regulatory framework, on the one hand, and harmonised market practices, on the other, are key factors guaranteeing a favourable outcome for these structural changes. in these areas a lot of work is under way, and much has still to be achieved in order to pave the way for truly integrated financial markets. harmonisation in, for example, repurchase agreements, national company laws including bankruptcy laws, and other aspects of the legal and regulatory framework, would enhance legal clarity and certainty and thereby improve the efficiency and stability of the financial markets. indeed, the european commission recently published an action plan containing priorities and timetables for measures aimed at improving the single market for financial services. in the action plan, measures are proposed to advance the harmonisation of the legal framework and market information, as well as to facilitate investors ’ operations throughout the single market. in this respect, i should also like to pay tribute to the international organization of securities commissions ( iosco ) for its efforts. although i have focused mainly on the financial system of the euro area, we can clearly see that the euro area financial system is an integral part of the global financial system. with this in mind, i should like to express my support

of making cross - border payments. in particular, transaction volumes in money markets rapidly reached high levels while typical bid / ask spreads decreased almost immediately to very low levels. this indicates the depth and high degree of liquidity that the euro money market has already achieved. a feature of the current stage of the development of the euro money market, which is particularly worthy of note, is that differences in overnight interest rate spreads mainly reflect differences in the credit standing of banks rather than that of the country in which the transaction takes place. these structural developments are, of course, positive. for the eurosystem ( i. e. the ecb and the national central banks of the 11 countries participating in the euro area ) the existence of a deep and liquid money market enhances the efficiency of monetary policy operations. in this respect, i should like to draw your attention to the “ market friendliness ” of the framework applied by the eurosystem to the conduct of monetary policy operations. by this i mean that the framework is based on tenders in which markets decide who receives the liquidity. the standing facilities are open and recourse to the marginal lending facility is not subject to scrutiny. in addition, the list of eligible collateral is extensive. prospects for the development of financial markets in the euro area looking now at the financial markets from a broader perspective, it is important to remember that the financial markets of the euro area began the process of integration before the start of stage three of economic and monetary union. an indication of the pace of integration before january 1999 is provided in particular by the evolution of spreads between yields on the bonds issued by the various central governments of the euro area. these spreads narrowed continuously from mid1995 onwards and their volatility was also noticeably reduced during this period. factors contributing to this favourable pattern included increased convergence towards low rates of inflation across the euro area during stage two, the gradual reduction and finally the disappearance of exchange rate risks, the commitment of governments towards improving the sustainability of public finances, and the increase in the depth and liquidity of government bond markets. as i have already said on a previous occasion, i believe that the interest rate markets of the euro area will increasingly provide an accurate reflection of the differences in credit quality between various issuers as well as differences in liquidity between bonds, while divergences purely related to the location of market participants within the euro area will become less and less relevant. it seems highly likely that the capital markets of the euro area