investment fund sector. finalising post - crisis reforms i welcome the decisions taken by the eurogroup3 to continue advancing the banking union, reforming the european stability mechanism and building euro area fiscal instruments. in the financial sector – which is my focus today – the response to the crisis has centred on addressing weaknesses in the regulatory and institutional framework. the new european regulatory framework is making europe ’ s banks more resilient and gives authorities the tools to act when risks begin to build up. furthermore, banking union elevates the supervision and resolution of banks to the european level. this strategy has paid off : substantial risk reduction has been achieved, is ongoing and should continue. banks now hold more and better - quality capital than in the past4, and have improved their liquidity positions and leverage. addressing legacy issues, such as high levels of nonperforming loans ( npls ), is progressing well. for banks under direct ecb supervision, npl 1 / 4 bis central bankers'speeches levels fell from €958 billion when the single supervisory mechanism was launched to €657 billion in june 2018. the framework for resolution, following the introduction of brrd and the implementation of minimum requirements of eligible liabilities ( mrel ) also contribute to increase buffers, reduce risk and thereby the scope for risk sharing. however, the euro area ’ s financial architecture is not yet complete. there is some good news : there is now an agreement to make the common backstop to the single resolution fund ( srf ) operational, which will instil confidence in the markets that bank resolutions will happen in an orderly fashion. there is also a recognition that it is time to start political discussions on the missing third pillar of the banking union – a european deposit insurance scheme ( edis ). the high level group in charge of the discussions must be ambitious and ensure that we live up to the agenda laid down in the roadmap on completing the banking union agreed by finance ministers in 2016. 5 the ecb has often made the point that the opposing sides of the debate – risk reduction versus risk - sharing, and private risk - sharing versus public risk - sharing – are in fact complementary. 6 completing the institutional leg of the banking union, with the srf and edis, would move us closer to a level playing field. in a genuine banking union, banks would operate across borders and diversify their sources of income, which would allow them to continue lending to the real economy even when faced with

third, the overall leverage of the sector is difficult to grasp. alternative investment funds do not face any binding restrictions on leverage. a tail of highly leveraged bond and hedge funds with leverage multipliers exceeding 30 compares to an average leverage ratio for banks of below 20 in the euro area. as the global crisis has shown, we must remain vigilant to possible new risks that might emerge in the financial system. we need to better understand the macroprudential dimension of risk in the investment fund sector. and we need to further enhance the sector ’ s resilience to systemwide shocks. the existing regulatory framework, with the undertakings for collective investment in transferable securities and alternative investment fund managers directives as the main 3 / 4 bis central bankers'speeches building blocks, is well designed to address micro - prudential and consumer protection concerns. however, additional tools need to be developed to address rising risks in the investment fund sector from a macroprudential perspective. macroprudential policy is primarily preventive. the toolkit available to macroprudential authorities should include ex ante tools to limit the build - up of risks associated with liquidity and leverage in the investment fund sector, such as minimum mandatory liquidity buffers and redemption notice periods. the investment fund industry in the eu is furthermore highly concentrated in a few jurisdictions, but – due to the diverse asset holdings and investor locations – the impact of adverse developments in this sector may be felt across the eu. so we should consider elevating the supervision of investment funds and the potential activation of macroprudential tools to the european level. this would be also in line with the spirit of cmu. a comprehensive, long - term european strategy for a more complete financial union let me conclude. finalising emu reforms, completing banking union and capital markets union must stand out as unquestionable objectives. we need to pursue a comprehensive long - term european strategy for building a more complete financial union that fosters both risk - sharing and risk reduction, which, as i argued, are two sides of the same coin. this will strengthen the financial system in the long run. achieving these objectives hinges on building a strong degree of trust between member states and european institutions. it fundamentally hinges on looking beyond short - term national benefits and pursuing european goals. europe should live up to its ambitions. thank you for your attention. 1 see constancio, v. ( 2014 ), “ beyond traditional banking : a