13 % for hungary ; in szapary, national bank of hungary, 2001 ]. given what i have just described, the financial sector in the accession countries is nowadays in remarkably good shape. the banking sector is sound and stable, the role of non - banking intermediation is growing, and clients have access to most of the products and services they have in the eu countries. following table illustrates the importance of the banking sector in three major accession countries [ czech republic, hungary and poland ] : structure of financial sector 100 % 90 % 80 % 70 % credit unions other pension funds ic & if insurance comp. banks 60 % 50 % 40 % 30 % 20 % 10 % 0 % cr hun pol it is evident that the financial sector in central european countries relies heavily on the banking sector, which represents approximately 80 % of total assets of the whole financial sector. it could be also seen that despite the dominance of banks in all mentioned countries, the structure of other financial institutions differs significantly. this is the result of varying approaches to building these institutions. for instance, in the czech republic, we can see the smaller size of the investment business as a result of the quality of the capital markets, the lax regulation at the beginning of the transformation, and the subsequent and rather frequent occurrence of frauds in the past. the delayed start of pension reform has also contributed to this situation. the largest banking sector in the new member states is the polish one, followed by the czech and the hungarian sectors. these three biggest countries account for more than 3 / 4 of the total new member states banking assets. the banking sector of all new member states is nevertheless very small in comparison with the eu market. the total banking sector assets in all new member states are only 345 usd billions at the end 2002 ( thus just 31, 5 % of citigroup, or 43, 4 % of deutsche bank, or 45, 5 % of hsbc ). structure of acs banking sector assets 3 % 2 % 2 % 1 % 1 % pol cz 7 % hun 38 % 7 % cypr svk slo lat lit 15 % est malta 24 % * as of 31st dec 2002, recalculated by market exchange rate a look at financial depth [ as measured by banking sector assets to gdp ] of individual markets in five accession countries [ czech republic, hungary, slovakia, poland and slovenia ] shows that there is still significant space for growth of financial intermediation. financial depth

decade prior to 2012, to a little above three over the past four years. however, over the same time, the supply has grown significantly, so that the absolute amount of turnover hasn ’ t changed all that much. the turnover ratio of corporate securities has declined to a little above one in the decade prior to 2012 to its current level of about a half. graph 1 looking at this another way, the share of the government bond market that used to turnover in an average month now takes a bit over six weeks, while the average share of the corporate securities market that used to turnover in one month now takes closer to two months. we also hear from market participants that it is, in general, a bit more difficult to transact in size. should we be concerned about this? not necessarily. the corporate bond market in australia has never had a highly liquid secondary market. it has always been predominantly a buy and bis central bankers ’ speeches hold market, and most participants are well aware of this. more generally, bond market activity in australia has been structurally declining over a long period. in the mid 1990s, the turnover ratio for government bonds was around 10, by the late nineties this had fallen to around 7. a decade later in the mid 2000s, it had fallen to around 5 and now it is 3. there are number of explanations for this decline in turnover which i will now turn to. derivatives market participants have been increasingly transacting in derivative instruments rather than the cash bonds. since the mid 1990s, activity in bond futures and interest rate swaps, relative to bonds outstanding, has increased sharply ( graph 2 ). in 2015, the value of turnover in bond markets was around $ a2½ trillion whereas the value of turnover in both the australian dollar interest rate swaps and bond futures markets was each around $ a9 trillion. 4 growth in activity in these markets in recent years has significantly outpaced growth in issuance of australian dollar bonds. overall, the increase in derivative activity has more than offset the decline in bond market activity. graph 2 these figures are sourced from the afma. i ’ m only referring to interest rate and tenor basis swaps turnover here. bis central bankers ’ speeches there is a clear preference for bond issuers and investors in australia to manage the risk associated with their bond issuance or bond holdings by transacting in the derivative instruments rather than in the physical instruments. 5 this has resulted in a further concentration of liquidity in the derivative instruments and a