* markets can be defined by the instruments that are traded on them : oil, gold, foreign exchange, interest rates. but they are also defined by the people who use them. a marketplace brings together people who, by virtue of trading with each other, share common interests. it forms a community. and as for all communities, the protection of each of its members against potential abuse by others requires appropriate governance. this raises a particular issue for those markets that extend across national borders. it is that issue which forms the topic of my remarks. bis central bankers ’ speeches 1. the benefits of cross - border markets cross - border markets are a fact of contemporary life. there have of course been periods of high integration of global trade and finance in the past – the decades immediately preceding world war i were a particularly stark example. but markets have never been more integrated than they are today. trade integration is ever more facilitated by technological progress, making the transportation of goods easier and faster ; and by the fact that, in a digital age, a rising share of services in global output makes the distance on the ground between producers and consumers less of an obstacle to transactions. that is why global integration of trade 1 has risen sharply from 39 % of gdp in 2000 to 48 % in 2014. for the euro area, trade openness has increased from 58 % to 66 % of gdp over the same period. the same applies to finance, too – and perhaps all the more so. capital can be shipped across vast distances at virtually no cost. and there are good reasons why we should want in principle to facilitate cross - border investments. financial markets intermediate between the needs of savers and borrowers ; they open up a range of opportunities to both, thereby supporting innovation ; and they allow risks to be shared among those more willing or better equipped to bear them. all of this applies across borders as well as within borders. let me give you an example. countries, just like individuals, have different needs for capital at different stages of their demographic lifecycle. those with young demographics exhibit demand for capital from overseas, while countries with more mature populations have excess savings as they accumulate assets for retirement. in the case of europe, our demographics would justify a moderate current account surplus and capital account deficit. put differently, we benefit from open markets because we need to be able to invest abroad part of the savings that will finance our pensions. 2 for all these reasons, the belief that open markets are conducive to freeing human

- making at the level of the market. let me again illustrate what i mean with an example. before the crisis, the banking market in the euro area relied on the home supervision, host recognition model. under this model, confidence that standards of supervision were broadly equal relied on mutual trust between supervisors. that trust, however, was weakened by the crisis, causing finance to retreat behind national borders. this manifested in some countries as a “ sudden stop ” of capital flows, and the resulting financial fragmentation led to the transmission of the single monetary policy being impaired in those areas. the creation of the single supervisory mechanism, which started operations just over one year ago, was in part a response to that problem. a single supervisor, applying homogenous methodologies, internalises mutual trust. and this not only provides greater protections for citizens, but also brings substantial benefits to member countries. their financial institutions can fully exploit economies of scale within the single market, without having to contend with different interpretations of rules or different supervisory regimes. in sum, with a single currency the benefits of a single market are commensurately higher. but the costs of the market fragmenting are commensurately higher, too. for countries that share a single currency and a single market, therefore, the case is clear – i would say almost undeniable – for stronger common governance and deeper institutional integration. today, that means as a priority completing banking union : a fully - equipped single resolution mechanism and a uniform deposit insurance scheme. bis central bankers ’ speeches the question of how to safeguard mutual trust is inevitably more complex at a global level. there is no political entity that coincides with the global market, like in the european union, that would allow the creation of institutions at the level of the market to enforce the rules – at least not in a way that would be politically legitimate and accountable to the community they serve. and this inevitably does not allow as fully open and irreversible a market as we have within the eu. this issue of the legitimacy of global governance was highlighted recently by the interest shown by legislative bodies, the us congress and the european parliament in particular, for the work carried out under the aegis of international bodies such as the basel committee for banking supervision of the financial stability board, which mark carney chairs. yet, we need global standards and rules to uphold the freedom and openness of global capital markets. and if they are enforced in ways which are not comparable, then it may not allow