yves mersch : reaching for perfection – building the market infrastructure of tomorrow opinion piece by mr yves mersch, member of the executive board of the european central bank, published in eurofi magazine, 7 september 2016. * * * last year the eurosystem launched target2 - securities, or t2s, a pan - european platform for securities settlement in central bank money. this is a major advancement in europe ’ s securities infrastructure, allowing banks to carry out cross - border securities transactions in the same way as they make domestic transactions, and at lower cost. it also enables banks to manage their collateral more effectively by creating a single, centralised pool of liquidity. with t2s, banks can move collateral quickly and easily to where it is needed, rather than it getting blocked in local markets where it is not being used. t2s is just one part of the infrastructure that forms the backbone of europe ’ s financial market. the eurosystem has been working hard over the last decade to ensure this infrastructure is sound and efficient. what ’ s more, it forms the foundations of the capital markets union ( cmu ) by providing the technical network through which capital can move freely around the eu. the free movement of capital means greater access to financing for europe ’ s businesses and more diversified investment opportunities for investors. continuing with the example of t2s, this platform makes it much easier for a bank based in portugal, for example, to buy securities in latvia and to use them as collateral for transactions in france. t2s therefore makes it technically and physically possible to achieve the objectives of cmu : mobilising capital wherever it is found in the eu. moreover, the eurosystem ’ s work to build a strong financial market infrastructure has been the trigger for regulatory change in europe. for example, as t2s was being developed, it became clear that greater harmonisation across borders would amplify the benefits of the securities settlement platform. t2s has thus driven an extensive harmonisation agenda, bringing together the market to align rules and practices. the csd regulation laid down harmonised rules and requirements, which have created a more level playing field in the post - trade arena. despite all the work done so far, new challenges are constantly emerging that require the eurosystem to adjust and enhance the financial market infrastructure further. even a safe and efficient market infrastructure can be enhanced and complemented with additional functionalities and features. for example, as digitalisation changes

fallen back to under 50 dollars per barrel in august. instead, it rose to new record highs during the summer. it is true that it has dropped somewhat recently but it is still above our previous forecast. even the expected future oil prices, the forward rates, have risen. how the high oil price will affect the world economy and price levels at different stages of production is hard to judge. the effects that can be expected to arise will depend, among other things, on whether the high price first and foremost reflects rising demand or whether it is due to supply shocks. the upturn in the oil price in recent years has been accompanied by an increase in oil production, which indicates that the price increase was mainly due to high demand. mounting demand from countries with rapidly increasing industrial production, such as china and india, has probably played a part. at the same time, it is evident that there have been supply shocks. the conflict in iraq and the recent storms in the gulf of mexico and the southern united states are just a few examples. what is worth observing is that the rise in the oil price, of almost 40 dollars per barrel, since 2002 does not appear to have dampened global growth to any appreciable extent. this can probably be explained in some measure by the fact that the upswing thus partly seems to be a result of the sharp 1 / 4 expansion in asia and by the fact that economic policy has become more expansionary. that the industrialised countries in particular are not as dependent on oil as before should also have contributed to the effects so far being less than in previous oil crises. however, it is also conceivable that the full impact of the supply shocks has not yet become evident on growth and inflation. to sum up, the oil price and its effects on growth and inflation are a significant source of uncertainty that we are grappling with in our assessment of growth prospects and the inflation outlook. low long - term interest rates in the financial markets recent developments have been characterised by a continuation of low longterm interest rates and a stable krona. the low bond yields are somewhat puzzling. even though corporate earnings have continued to increase in line with the continued strengthening of international economic activity, investment in many countries has not picked up to the same extent. while the willingness to invest has been relatively low in industrialised nations, regarded from a cyclical perspective, saving has also been high in certain oil - producing countries and in several asian economies. the combination of