venture capital funds is being considered. measures have also been adopted to promote the use of simple, transparent and standardised securitisations in order to provide bank lending to small firms. these examples evidence the complementarities between bank markets and capital markets, and also how the banking union and the capital markets union reinforce one another. turning to equity markets, progress has been made to provide firms with access to these markets. further, many studies have been undertaken to identify the obstacles to international investment. yet, in order to equip the euro area with greater stability, resolute headway must also be made in european bank integration. pan - european banks are an essential requirement if we are to have a single market for wholesale and retail financial services. that will provide both for gains in efficiency and cost reductions in banking services. and, moreover, it would contribute to improving the euro area ’ s stability in the face of shocks. in this respect, the culmination of the banking union with its three pillars and the subsequent creation of pan - european banks would also enable the link between sovereign risk and bank risk to be substantially mitigated. there has been significant progress on the first two pillars, the single supervisory mechanism and the single resolution mechanism. but the third pillar – the creation of a european deposit guarantee scheme – remains pending. in conclusion, in europe, and in spain in particular, we have witnessed a phenomenon of greater disintermediation in recent years. associated with it is a more significant role for capital markets when it comes to providing financing for the economy and channelling citizens ’ savings. in parallel, technological change conducive to disintermediation is under way, and is prompting the creation of new services and risks that must be addressed by the supervisory community. to harness these market trends so as to promote the soundness and stability of economic and monetary union, resolute progress must be made towards the greater european integration of banking markets, fomenting at the same time the development and integration of capital markets throughout the union. thank you. 7 / 7

board also moved quickly to ease monetary policy after the events of mid september, with interest rates being reduced significantly. at 3 per cent, the overnight rate is at the lowest level seen since the early 1960s. this has fed through into significant declines in the rates paid by borrowers, especially, but not only, households. the debt servicing costs of households have fallen faster and further than in previous cyclical episodes. the board has not felt the need to cut our policy rate to the very low levels – effectively zero – seen in some other countries. there are two reasons. the first is that the situation we face is not as dire. the second is that the reduction in interest rates we have implemented has had a more direct effect on borrowers than in many other countries. the combined impact of the easing of fiscal and monetary policy is likely to be substantial. quantification of the effects is very much a matter of informed judgement. the fact that australia is experiencing, so far, a smaller downturn than most countries reflects in part the relatively smaller extent of the sort of financial excesses that have been the problem in some other countries, as well as the good fortune of our position in relation to china. but significant macroeconomic policy responses will have also played a role. fiscal initiatives were not only sizeable by global standards, but implemented quickly. the impact of monetary policy easing in terms of reducing debt servicing burdens for borrowers has been greater than in the major northern hemisphere countries. the relevant question now is : what are the prospects for a durable expansion? it is likely that activity has remained subdued in the june quarter. the rapid decline in business investment is almost certainly continuing. while consumer spending has held up quite well so far, it may be weaker over the next few months, as the one - off government payments pass and rising unemployment starts to weigh on incomes and willingness to spend. on the other hand, we are likely to see significant growth in public spending over the year ahead, reflecting fiscal policy decisions. moreover, while it will be a while yet before the effects of lower interest rates and the boost to grants to first - home buyers are seen in data on construction work done, the pick - up in borrowing for housing that we have been seeing for about six months is what would be expected if an upturn in residential investment spending is to begin later in the year. overall, then, our expectation remains that the economy will be well placed for expansion towards the end of this year. initially