definition of user requirements, and these will benefit from a public consultation. last but not least, i would like to mention the european retail banking markets, which are less integrated than the other euro area financial market segments and which also still display fragmentation in the retail payment infrastructure. however, we also see progress in some fields. see at http : / / www. ecb. int / stats / money / step / html / index. en. html # data. the data are published weekly on the first business day of each week, referring to each day of the previous week. for example, the current fragmentation of the european retail payment infrastructures is being addressed by the so - called sepa project that has been initiated by the european banking industry with a view to creating a single euro payments area. the eurosystem supports this project in a catalyst role, by providing guidance to banks and the payments industry in setting objectives and defining highlevel requirements. i am very glad to report that the self - regulatory approach chosen for sepa is working well and that we expect the european banking industry to launch the first sepa instruments according to schedule on 1 january 2008. also, a number of indicators point to increasing cross - border banking activities in the euro area, such as the growing cross - border share in the financial holdings of banks and the cross - border mergers and acquisitions. i would like to emphasise the fact that cross - border banking is first and foremost a market - driven process. still, the public sector can play a significant role in providing an adequate policy framework. according to our assessment, which we also explain in our new report, the eu supervisory arrangements have been substantially enhanced by two significant measures : the extension of the lamfalussy approach to the banking sector and the adoption of the capital requirements directive ( crd ), which transposes in the eu the new regulatory framework for banks ’ capital adequacy as agreed by the basel committee on banking supervision. both measures contribute to increasing cooperation and coordination between supervisors on a cross - border basis. the crd provides for better home - host supervisory cooperation, among other things, by enhancing the role of the authority responsible for the consolidated supervision. for now, i would summarise the situation by saying that the ecb is supportive of the lamfalussy framework and that this framework should be fully exploited to show its full potential. a review of the lamfalussy approach is scheduled to take place by the end of

2005 – suggesting that investors are increasingly diversifying their portfolios across the euro area. as a way of testing the idea that, in integrated markets, bond yields would react to common factors, rather than local ones, one can also make a regression of changes in bond yields of individual governments against changes in yields of a benchmark bond. in the ecb ’ s new report, we show that the estimated coefficients of this regression varied substantially up to 1998, but converged afterwards towards 1, which is the level of perfect integration, suggesting that the euro area government bond market has reached a very advanced stage of integration. finally, the quantity - based measure of euro area equity market integration also indicates a rising degree of integration in the equity markets. between 1997 and 2005 euro area residents doubled their holdings of equity issued in another euro area country to reach nearly 30 %. this implies that, following the introduction of the euro, euro area investors have significantly reallocated their equity portfolio from domestic holdings to holdings elsewhere within the euro area. as a remaining challenge to the integration of euro area securities markets, i note that the euro area securities clearing and settlement infrastructure underpinning both bond and equity markets is not yet sufficiently integrated. several initiatives to achieve an efficient and integrated market infrastructure are underway. last november, for example, at the european commission ’ s request, the relevant european industry associations and their members signed a “ european code of conduct for clearing and settlement ”. in essence, this code aims to foster competition and efficiency of clearing and settlement in the eu, by ensuring the transparency of prices and services, interoperability between exchanges, central counterparties and central securities depositories, and unbundling in the provision of services. the code represents the first self - regulatory approach in the area of eu clearing and settlement. the ecb welcomes this initiative and acknowledges the commitment by the industry to implement the code. a monitoring committee by the european commission, the ecb and cesr will assess whether the – voluntary – compliance with the code will be effectively achieved. in this respect, let me also mention that the eurosystem considers developing a single platform for the settlement of securities in central bank money – the so - called target2 - securities. the scope of this project is restricted to the settlement layer of the post - trading activity regarding securities settled in central bank money and does not involve custody services and other activities, which remain separate economic activities performed by the central securities depositories. the present step is the