participants who bet on the failure of countries to use part of their future earnings to convince people that there is no other way possible, that an “ orderly ” failure that puts public finances back on track is better. the more people who are convinced of it ( “ as greece is going to fail, help is useless ” ), the more likely becomes the outcome desired by financial market participants, although it is not in the general interest. these issues raise ethical and moral questions that have been widely discussed, but from a limited point of view. the appeal to ethics and individual morality is an important starting point to correct the distortions that i mentioned above. but it ’ s not enough. the experience of recent years has shown that self - regulation and self - discipline do not suffice to prevent market distortions. this stems from the fact that the measure of individual performance, which is the economic result, can be appropriate in a theoretical context of perfect and complete information, particularly about how that result was obtained. financial markets are, however, characterised by information asymmetries that make it very difficult to identify the source of profit, especially if it has been achieved thanks to the ability of the individual market participant ( known in the jargon as alpha ) or due to the risk it has taken and that may be improperly measured, precisely because of the informational asymmetries in the financial services available to the client. other financial market participants and supervisory authorities are not always able to adequately identify the relative contribution of the two factors and therefore to punish unethical behaviour. 7 however, not all unethical behaviour which shows a conflict of interest is directly punishable. in some cases it is considered that the reputational loss of the market participant who fails to live up to ethical principles is a sufficient incentive to ensure fairness. but if the gain more than compensates for the loss of reputation, the incentive to continue to violate the ethical principle remains, perhaps in a more effective manner. if the unethical practices make it possible to obtain higher returns, those who do not follow them are likely to be penalised. in other words, those who comply with the dictates of ethics may not perform economically so well as those who do not, and so may find themselves out of the market. 8 self - regulation works if everyone respects the rules and if that compliance is easy to monitor. since the financial market information asymmetries make it very difficult to distinguish between those who observe the

vitor constancio : synergies between banking union and capital markets union keynote speech by mr vitor constancio, vice - president of the european central bank, at the joint conference of the european commission and european central bank on european financial integration, brussels, 19 may 2017. * * * banking union and capital markets union are undoubtedly the two central policy initiatives to catalyse financial integration in the eu. consequently, they received a great deal of attention in the ecb ’ s report on financial integration in europe over the last years and stand at the centre of today ’ s conference. 1 the benefits of the two initiatives are known. banking union increases the resilience of the banking sector, facilitates sector consolidation and enhances the cross border credit market, expanding its financing capabilities and reducing intermediation costs. capital markets union contributes to diversify sources of finance for our economies and creates a risksharing channel that helps smooth out incomes and consumption via cross - border holdings of financial assets. in this perspective, i welcome the initiatives by the commission in the context of the review of the crd iv / crr and of the second communication regarding the progress of capital markets union. in the past, it was sometimes argued that banks and capital markets were competing with each other for a limited amount of viable investment opportunities. 2 some have even seen capital markets as threatening traditional banking models. however, banks and capital markets are rather closely interconnected as parts of the wider financial system : banks and markets complement each other in financing the real economy. therefore, we should not treat banking union and capital markets union as two mutually exclusive projects but rather see them as mutually reinforcing initiatives that can bring the single market for financial services to the next level. in my speech today, i will argue that there are very good reasons to think about banking union and capital markets union together, to capture the synergies between them and to work on overcoming the impediments that constrain both of them. the need to reap these synergies is particularly compelling at this crucial moment in time, in which the u. k. has announced its departure from the eu. the prospect that the largest financial centre in europe will drift away from the eu27 single market brings a number of specific challenges and opportunities for the further development of the banking union and capital markets union. on the one hand, london is an important provider of financial services to firms in the eu, in particular as regards capital market