monetary union is not viable in the absence of a banking union. more recently, with the recovery in the euro area still fragile, new geopolitical tensions have led to an unprecedented refugee crisis and increased uncertainty. finally, matters such as the consequences of brexit, different approaches among member states regarding banking union, and the slow progress in establishing a single european deposit insurance scheme, have been hindering further progress in securing the financial system architecture needed to enhance stability. ssm has been the catalyst for the banking union of the eu. it provides a framework for common rules and policies across the euro area banking sectors ; it enhances single supervisory treatment over segmented national practices. but it also has to cope with increased uncertainty in two areas : the possibility of major changes in the future regulatory framework and the way that new regulation is going to be applied. bis central bankers ’ speeches

across the atlantic, the federal reserve, has advanced in normalisation with four rate rises in 18 months, which have brought the target rate on the federal funds to 1. 25 per cent, from a target of 0 - 0. 25 per cent in the seven - year period to december 2015, and an announcement to cautiously start the normalisation of its balance sheet already in october this year.. despite the – somewhat reluctant – tightening of the fed, the us monetary policy could actually be assessed as still being rather loose. the global capital flows from the emerging markets that are invested in the us contribute to this easing. turning now to the bank of england, in the aftermath of the brexit referendum ( summer 2016 ), the bank cut its interest rate to a record low of 0. 25 % after more than 7 years of static interest rates. it also boosted its qe scheme, while committing extra funds to encourage banks to lend. the rhetoric however has become more aggressive over the past few months, notably due to 4 / 9 bis central bankers'speeches surging inflation – brought on by the weakened pound since the referendum – despite a slowdown in the economy as the country prepares to leave the european union. with respect to normalisation strategy, the bank of england has in the past given indications that rate rises would precede any asset sales. according to governor carney back in 2013, the first move would be to tighten conventional monetary policy, for some time, or to some degree, before considering adjustments to the size of the balance sheet. overall, in the context of the ongoing global economic recovery, the major central banks can adjust the parameters of their policy stance at a rather small cost in terms of market disruption / dislocation. as markets anticipate the first tightening steps from the major central banks, a channel that is likely to show some volatility is the exchange rate channel. this adds to uncertainty, as – among other things - it has implications for the medium - term outlook for price stability. in addition, a possible overshooting in the foreign exchange market could lead to fluctuations in the trade imbalances, including those of the euro area. the outcome of the normalisation process is likely to be determined by the interplay and the relative stance of the policies of major central banks as they move towards a less accommodative stance in the coming years, as well as by several structural features of the different economies. in any case, appropriate communication is vital