the ecb is, and will remain, to maintain price stability in the euro area. this objective will not change with the ecb ’ s new responsibility for banking supervision in europe. however, bearing in mind the role of financial markets for the transmission of monetary policy and the importance of well - integrated financial markets in a monetary union, measures to ensure a stable and well - ordered financial system in the euro area will be beneficial for the conduct and smooth transmission of monetary policy. bis central bankers ’ speeches the banking union can therefore support our single currency and can relieve monetary policy of some of the tasks undertaken during this crisis – notably, the task to repair or, in some cases, to bypass a clogged transmission channel. the non - standard measures may then be gradually phased out, as the changes introduced in the monetary policy framework during the crisis will no longer be necessary. this should not be confused with a change in course from the accommodative monetary policy. a phasing - out of certain emergency measures is desirable, given that new market distortions might otherwise emerge. financial fragmentation affects monetary policy the years preceding the financial crisis were very favourable as regards the integration of capital markets in europe, with the integration of euro area money markets forming a key pre - condition for the proper conduct of monetary policy. our policy rate instantaneously transmits to the interbank money market rates and determines the refinancing conditions of the banking sector. in this regard, the money market further transmits monetary policy impulses to other markets and financing conditions and is key to the homogenous transmission of monetary policy across the euro area. moreover, the integration of securities and wholesale markets plays an important role for the funding of the banking sector. with the banking sector in the euro area being an essential source of financing of the real economy, the integration of these markets plays an important role in the pass - through of monetary policy decisions to the lending rates of the banking sector. the financial crisis has challenged the stability and integration of european financial markets in an unprecedented way. it has thrown into reverse the steady integration seen since the inception of the euro. the causes for this were manifold. first, heterogeneous economic developments caused by financial and structural imbalances across euro area member states led to outflows of funds from the countries that were perceived as more risky – in view of their large cumulated imbalances stemming from ample competitiveness gaps, high current account deficits and high private

conditions – it led to important deficiencies that were first laid bare by the crisis. • the lack of a robust regulatory and supervisory framework led to the failure to identify and control an unbalanced and unsustainable expansion of credit in some countries, during a period characterised by low interest rates, abundant liquidity and easy access to credit. • a framework fundamentally based on the national perspective was also not conducive to identifying cross - country interdependencies and the potential for spillovers, which therefore went unaddressed. • when the crisis erupted and the vulnerabilities materialised, the framework also revealed the lack of adequate crisis management mechanisms. national supervision proved to be a major obstacle towards a more efficient management of the crisis, leading to a serious setback in the process of financial integration. monetary policy in the crisis in this environment of financial refragmentation of euro area financial markets, central banks had to step in. if risks to financial stability hamper the proper transmission of monetary policy, monetary policy may be rendered ineffective, thereby impeding the ability of central banks to safeguard price stability. financial cohesion, in turn, ensures that the monetary policy signals are properly and evenly transmitted to all jurisdictions of the monetary union, without, however, levelling out the premiums for different credit and liquidity risks. in fact, during the crisis, the divergence of bank funding conditions at national level has led to cross - country differences in both the costs of financing and the availability of loans. the retrenchment of credit supply within national borders, coupled with funding pressures, has impaired the transmission of monetary policy. the need to counter these adverse developments has been a key rationale behind the extraordinary monetary policy actions undertaken by the ecb in the wake of the crisis, such as the full allotment, the longer - term refinancing operations ( ltros ) or the relaxation of the collateral framework. at the same time, the emergency liquidity assistance ( ela ) provided by the national central banks was used more intensively. although this is carried out by the national central banks at their own risk and for their own account, it might lead to tensions between the national and european levels of monetary policy, which would not be sustainable. a renationalisation of the monetary architecture would not be effective. our non - standard measures can and should only provide temporary support for two reasons. first, keeping our non - standard measures in place for too