restrictions on cross - state bank branching and ownership, which points in the same direction. these two aspects – monetary policy transmission and promoting citizen welfare - explain the efforts that central banks have made to contribute to the integration process, although the leading roles and initiatives rightly correspond to the european commission and to market forces. maybe the most telling example of the central bank contribution is the establishment of target, promoted by the eurosystem and introduced at the beginning of stage three with the aim of integrating the system of large value payments across the euro area. it is widely recognised that its success has played a crucial role in the integration of interbank markets in europe. however, the mandates of most central banks, including indeed both the eurosystem and the banco de espana, also cover other objectives. there is, in particular, an area which deserves special attention in this context. i am referring, of course, to the function of promoting financial stability. it is precisely in this area where the impact of financial integration is less clear. does financial integration promote financial stability? or does financial integration put financial stability in danger? as a matter of fact, while the effects of higher integration on per - capita income and on the efficiency of monetary policy transmission have received a lot of attention by researchers, the impact of financial integration on financial stability is under - researched. that is why we are holding this conference. despite the lack of research, it seems clear that there are some areas where financial integration favours financial stability. firstly, a more integrated financial system enlarges the opportunities available to investors, lenders and borrowers to diversify the different risks associated with their financial decisions. through such diversification, they should become less exposed to idiosyncratic shocks, asset prices and financial flows should behave in a smoother way and as a result, the risk of financial distress should be reduced. secondly, in a more integrated system, financial intermediaries would find it easier to grow and at the same time would find the incentive to do so in the enlargement of their potential markets. larger institutions would therefore be in a better position to reap the benefits of greater economies of scale, and would also increase their financial muscle to withstand potential shocks. unfortunately, however, there are no free lunches in the economy and it seems that financial integration can also have negative effects on financial stability. therefore, fully integrated financial markets pave the way for shocks to propagate more quickly among market participants, thereby affecting a

of the ratio, has continued posting negative rates of change. hence, the comparatively larger fall in npl in 2014 has been the main determinant of this reduction. in the first half of this year, the spanish banking industry posted somewhat lower consolidated profits than in the first half of 2013, although they were far removed from the heavy losses of 2012. in a setting still marked by low volumes of activity, low interest rates and a still - high level of non - earning assets, banks ’ ability to generate interest income remains subject to downside pressure. these factors were offset by the decline in operating expenses and by lower losses attributable to asset impairment. as to the industry ’ s solvency, spanish banks as a whole had a cet1 ratio as at june 2014 that comfortably exceeded the required minimum. the firming and intensification of these trends will largely depend on developments in the spanish economy and on recovery taking root. the outlook for the economy remains favourable ; so far, it has proven resilient to an external environment in which growth forecasts for the global economy have been revised downwards, and in which the recovery in european countries – those most important for our economy – has lost momentum. thus, on the domestic front at least, it would be necessary to embed the reforms under way, thereby enhancing our capacity for recovery. bis central bankers ’ speeches the start - up of the single supervisory mechanism among the challenges posed by the ssm is that of attaining quality bank supervision, applying strengthened and uniform standards and making the most use possible of the acquired knowledge of the various national authorities, while setting in place a common supervisory culture. in light of the work undertaken to date and the intense collaboration between the ecb and the national authorities, these goals are realistic. the banco de espana is striving to ensure this is a successful process, cooperating with the ecb and the other ssm participants. we have adapted our organisational arrangements and working methods to smooth interaction with the ssm and the ecb. a further key challenge will be to maintain a level playing field in the member countries, applying uniform supervisory principles. that is a major challenge, given that in europe there is a wide diversity of banking models and legal systems. further, while the heterogeneity of regulatory frameworks has recently been lessened following the entry into force of the capital requirements directive and regulation ( crd iv and crr ), differences persist and must be discussed. such