of risk - weighted assets. a healthier banking sector that stands on a sounder foundation would also be very helpful – to say the least – in the context of setting up the single euro area supervisor. this leads me to the second aspect of my remarks tonight : the progress towards banking union. the progress towards banking union recently, the economist was speculating that europe might be “ turning away from its promised ‘ banking union ’ ” and contemplated “ banking disunion ”. banking sectors that act as regional financial hubs require vigilant supervision. this applies especially to cases were potentially “ hot ” capital flows on the liabilities side are financing a bis central bankers ’ speeches growing pool of domestic assets. it has to be ensured that undue investment risks are not taken on the basis of fickle capital. many commentators noted that if only banking union had already been in place, developments in cyprus could have gone different. i think they may have a point. after all, why are we establishing banking union? • first, it will break the vicious feedback between weak banks and weak sovereigns ; • second, it will help restore the proper transmission of monetary policy ; and • third, it will improve the incentives for proper supervision and limit the susceptibility to any prospective regulatory capture. in essence, banking union is a means to fully reap the benefits from european financial market integration, while at the same time containing the risks of financial contagion. currently, we can only talk about the banking union project – we do not have such a union yet. this is why, basically, the same questions are asked time and again, both in europe and over here : • where do we stand in the process? • and are we getting off course? let me share some thoughts on these issues with you. the rather benign market situation over recent weeks and months seemed to have lulled policy - makers in a false sense of complacency. some wonder whether the enthusiasm and ambition for banking union is waning. voices from some countries seem to suggest a backtracking on the idea of direct esm bank recapitalisation. on the single supervisory mechanism ( ssm ), agreement was reached between the european parliament, the council and the european commission in march. some technical details still need to be clarified. once that is achieved, i expect the ssm regulation to be formally adopted by the council and the european parliament, hopefully around the middle of the year. at the ecb

deals with investment and innovation, which you have been invited here to discuss in particular. both these factors are closely interrelated and interdependent – almost like the chicken and the egg. there can hardly be innovation without investment. and without innovation, there can be no technological progress, which is a source of continuous productivity growth. it is essential to capitalise on that source if we want to move towards the production of goods and services of higher added value. such a shift would open up a prospect of higher long - term growth. this would allow to catch up with the average eu standard of living and, perhaps, exceed it in the long run. consistent economic growth would simultaneously imply broader possibilities for investment in the most productive sectors of the economy. 1 / 4 bis central bankers'speeches is it the right time to talk about that now, in an environment of global uncertainty? i think it is, given that the crisis is an opportunity and, perhaps, a historic chance to transform lithuania ’ s economy. the pandemic can be a catalyst for significant changes in investment and innovation, provided that we take a well - targeted approach. i will substantiate this thesis by discussing two types of investment – foreign direct investment and general government investment. dear colleagues, foreign direct investment is important in that it can help the state “ import ” new technologies and innovative process management solutions. in lithuania, foreign direct investment, as a share of gdp, is among the lowest in central and eastern europe. almost every country in the region – either montenegro, estonia, serbia, or bulgaria – has accumulated a larger stock of foreign investment, which, in some countries, is twice or even three times as great as that of lithuania. if we want to attract more foreign investment, we need to consider one important fact – a likely wave of deglobalisation in the post - pandemic world. countries and regions declare their aim to repatriate the production of strategically important goods. europe will strengthen its economic autonomy. this is where new possibilities emerge : even though global value chains will get shorter, they will be open to new participants. if we took bold and ambitious action, we could use these global shifts to our advantage – to attract foreign capital to our country and to step up our participation in value chains. in this regard, it is important to make targeted use of new possibilities and to attract investment specifically in the activities of higher added value, for instance, in the creation of product