is happening at a time when the banking sectors of some countries still need to consolidate. let ’ s turn to europe ’ s banking union. it now rests on two pillars : alongside banking supervision, there is a mechanism that allows us to resolve banks without disrupting the financial system. banks can fail, and they will fail. that became clear earlier this year when the new system passed its first test. what is still missing, though, is the third pillar of the banking union : a joint deposit insurance scheme. but the first two pillars alone ensure that the most critical aspects are covered. banks, their owners and their creditors not only have to comply with stricter rules and more intrusive supervision ; they are also subject to greater market discipline as it has become clear that they can be allowed to fail. 1 / 2 bis central bankers'speeches it is up to each bank to endeavour not only to survive but also to prosper in these circumstances. and the good news is that it is possible to do so. our analyses have revealed that there are a number of banks which consistently outperform their peers. so there is progress and hope, but only for those who understand this new world, accept it, and act accordingly. thank you for your attention. 2 / 2 bis central bankers'speeches

##s the underlying pace of monetary expansion, owing to the impact of the flat yield curve and other temporary factors, nonetheless, even after taking such effects into account, a broad - based assessment of the latest data confirms that the underlying rate of money and credit growth remains strong. the current structure of yields has triggered substitution both within and into the broad monetary aggregate m3, leading to a pronounced decline in annual m1 growth and very rapid increases in time deposits. at the same time, higher short - term interest rates have served to moderate the growth of household borrowing, although cooling housing markets in several parts of the euro area have also played a substantial role in this regard. however, the growth of bank loans to non - financial corporations has remained very robust despite the rises in short - term rates. while some moderation can be expected in the future in the light of tightening financing conditions and more moderate economic growth, bank borrowing by euro area non - financial corporations grew at an annual rate of 14. 2 % in may 2008, and the flow of loans in recent months has been strong. not least in the face of the ongoing tensions in financial markets, the monetary analysis helps to support the necessary medium - term orientation of monetary policy by focusing attention on the upside risks to price stability prevailing at medium to longer horizons. moreover, a thorough assessment of the money and credit data has provided an important insight into bank behaviour and financing conditions. in particular, the strength, maturity and sectoral composition of bank borrowing suggest that, at the level of the euro area as a whole, the availability of bank credit has, as yet, not been significantly affected by the tensions. to sum up, a cross - check of the outcome of the economic analysis with that of the monetary analysis clearly confirms the assessment of increasing upside risks to price stability over the medium term, in a context of very vigorous money and credit growth and the absence thus far of significant constraints on bank loan supply. at the same time, the economic fundamentals of the euro area are sound, and incoming macroeconomic data continue to point to moderate ongoing real gdp growth when the high volatility of growth rates in the first half of this year is taken properly into account. against this background and in full accordance with our mandate, it is imperative that we prevent broadly based secondround effects and counteract the increasing risks to price stability. we emphasise that maintaining price stability in the medium term is our primary objective and that it is our strong determination to keep medium and long