savings and cooperative banks, which epitomise what are known as “ consolidating ” or “ defensive ” mergers, aimed at cutting costs and possibly also at diversifying risks. so far, this consolidation process has taken place mainly within national boundaries, with the possible exception of some mergers in the benelux and nordic countries. the preference for domestic mergers, as opposed to cross - border mergers, may be explained by the fact that the relevant market for retail services is still national rather than pan - european in character. furthermore, the scope for cost cutting appears to be larger if the activities of the institutions merging overlap, although there is no particularly strong empirical evidence of this as yet. the fact that cultural “ proximity ”, notably in the corporate style of governance and management, is traditionally seen as a key factor in the success of mergers may also help to explain the limited cross - border merger activity. it has to be said that although most mergers have been domestic, they have often been instigated and influenced by area - wide market developments and the integration of financial markets following the introduction of the euro. as of today, there is no doubt that the introduction of the euro has fostered the internationalisation of banking activities. in particular, the rapid integration of the wholesale banking and capital markets, as well as large - value payment systems, has already produced more and new kinds of links among banks. as a result, banks are increasingly exposed to risks from abroad, and risks to financial stability are far less frequently confined to national borders. the most substantial increase in cross - border activity and market integration has taken place in wholesale activities. for example, the currency - based segmentation of the markets for unsecured interbank deposits disappeared very quickly after the euro was introduced. this could be seen from the rapid convergence of national spreads. furthermore, market integration has not only been reflected in price quotations, but also in trading volumes. the share of cross - border transactions currently accounts for more than 50 % of overall activity in both the unsecured and the repo markets. some large institutions are starting to act as “ money centre ” banks with an area - wide scope of activity. the smaller institutions still mainly operate with their domestic counterparts. they nonetheless benefit from the more equal market conditions. accordingly, the share of cross - border transactions in the area of large - value payment transfers through the target system has been increasing steadily. in addition to the single monetary policy, two main reasons explain the rapid

this process very closely in order to ensure further cost and efficiency benefits for euro area corporations and citizens. conclusions i have outlined the factors that are the main determinants underlying the changing structure of the financial system in general and the banking sector in particular. overall, the various elements of the banking sector show that it is likely that a number of banking activities will be affected by this change. the foreseen structural changes require the need for adjustment to be taken seriously by all participants in the financial system. this adjustment appears to have intensified in recent years, as there has been an increase in merger activity, an establishment of alliances and an introduction of new products and services, often based on modern information technology. the process of structural change embodies an element of risk, but if these risks are identified early and analysed carefully, then they can be duly taken into account. what the ecb can do to help in this area is, first of all, to maintain stable monetary conditions. by creating an environment of price stability, we allow private sector agents to focus their attention on those questions which are of most relevance to their activities and to take advantage of the benefits of this stable environment, such as the possible extension of their planning time horizons. secondly, we can, to some extent, increase the awareness of the developments in the euro area ’ s financial structure and banking sector by providing euro area - wide information, and also analyses of these developments. all in all, the introduction of the euro and the single monetary policy has created a fundamentally new environment for banks in the euro area. a new environment that will entail certain risks, but that will also provide many opportunities for growth and enhanced efficiency in the banking industry. i am convinced that the latter will prevail.