##ate normalization and tightening to be sure, r * is unobservable and its estimation remains surrounded by uncertainty. but i believe it remains a helpful concept in the current normalization. page 7 sur 8 according to me, for the euro area, until we are around r *, the neutral rate — which possibly lies between 1 and 2 % in nominal terms — the road ahead is clear and we can go in a sustained and determined way, including through some guidance. doing so is normalization, lifting our foot from the accelerator pedal. in my view, we could be there before the end of the year, after another significant step in september. only beyond r * could tightening — actively pushing the brakes — begin ; we will then have to discuss and decide, based on our assessment of actual inflation and the future outlook, focusing in particular on its core part and on wage developments. the us is obviously closer to tightening due to several differences in the nature of inflation there. but have no doubt that we at the ecb would if needed raise rates further beyond normalization : bringing inflation back to 2 % is our responsibility ; our will and our capacity to deliver on our mandate are unconditional. iii. how to remunerate massive excess liquidity when it coexists with positive rates? let me come to another issue that we practitioners must now confront : how to remunerate massive excess liquidity when it coexists with positive interest rates? this will be a new situation for most of us, and especially for the euro area. while excess liquidity was negligible until 2008, it currently stands at more than €4 trillion, as a legacy of our app and pepp assets purchase programs, but also, for one third, our tltros. yet, our reserve remuneration system was designed at a time of negligible excess liquidity. the system already showed its limits in the past, when having to coexist with negative interest rates. left unchanged — without our tiering system — it would have severely impaired the bank channel in the transmission of our monetary policy. the return of policy rates to positive territory would this time provide a sizeable risk free income to the banking system, and a similar loss for the eurosystem. the possible losses for central banks and the eurosystem may draw public attention, but the primary objective of monetary policy is price stability, not central bank profitability ; and the more relevant issue page 8 sur 8 in

is in resolution. in the case of a systemic bank, the amounts needed could be very significant. a “ eurosystem resolution liquidity ” could be provided by the ecb at this end as discussed in 2018. this raises the issue of the guarantee framework that should support this facility in order to comply with the european legal framework. another difficult but meaningful way forward for the resolution framework is the harmonisation of bank bankruptcy regimes across europe. i am conscious that bankruptcy regimes, often mentioned in the framework of the cmu, represent a legal challenge. let us see how we could at least progress on this issue for bank bankruptcies. this work may be focused on the more essential points to facilitate consistency with the resolution tools, like treatment of depositors / creditors hierarchy. 4. the need for an integrated approach to new players. finally, looking forward now, let me consider broader developments in the financial sphere. recent trends in financial innovation have fuelled the emergence of a renewed financial intermediation ecosystem, involving new players – including tech companies, be they fintechs or bigtechs. the associated technological disruptions have resulted in regulatory arbitrage practices, especially on the banking market. lending activities by non - bank financial intermediaries also circumvent prudential regulation. i wish to stress a major point here : we must avoid repeating the mistakes of the past. innovation must not translate into further fragmentation. right from the start we should try to have an integrated supervision at the european level for new players and new technologies. regarding innovation, private initiatives do have their role to play in fostering a european integration. here, let me commend the european payments initiative ( epi ) project. the epi will provide citizens with a unified, innovative and autonomous european payment solution, as an alternative to the dominant and extra - european players already established in europe or the bigtechs in the future. we must support the emergence of such pan - european projects, in order to preserve and reinforce our financial sovereignty. and we don ’ t have much time to succeed, in the very next years. * * * in conclusion, let me come back to the natural complement to the banking union : the capital markets union. we all agree that we badly need it, even more so after brexit : here in eurofi, on 3 / 4 bis central bankers'speeches the governing council, and – in principle – around the ecofin table. but almost nothing, or very