this brings me to a second issue, of housing finance as a channel of monetary transmission. obviously, as households take on more housing debt, they react faster and more strongly to interest rate movements, thus allowing the central bank through their interest rate policy to have a greater influence on macroeconomic activity. a faster and fuller pass - through of interest rates facilitates the conduct of monetary policy and enhances its effectiveness. in this context much depends on whether mortgages are with fixed or floating interest rates. countries, of course, differ widely on this, for historical, legal or other reasons. whether the expansion of the mortgage market is responsible for the often - observed significant increases in housing prices is a moot point. there are many good reasons that support higher prices, such as demographic changes, as smaller families require more overall living space, expectations that real and nominal interest rates will remain low, and regulatory restrictions that curtail land supply. surely, the ample liquidity that has been pumped into the markets in recent years has created conditions conducive to speculative excesses. most countries in the euro area have not yet had any experience of significant correction in nominal housing prices. it is possible that both borrowers and creditors have underestimated this possibility and in some cases both credit expansion and housing prices increases look questionable. developments in greece are a good illustration of the forces that operate throughout europe. after the full liberalization of the financial sector we have seen a real revolution of housing finance. since 1996, mortgages have more than doubled as a share of banks ’ portfolios, while there was a fivefold increase of mortgage debt as a proportion of gdp. the first trend was the result of falling interest rates and increased competition that led banks to search for new areas of profitable expansion. households, on the other hand, facing improved conditions, as exemplified by that fast growth of gdp and lower costs of borrowing, reacted quite rationally by increasing their indebtedness. the ratio of homeownership in greece has been among the highest in europe, fluctuating around 80 percent in recent years. mortgage demand has probably been used to improve housing conditions rather than enter the market for the first time. demand from economic immigrants has supported this trend by allowing existing homeowners to sell their entry - level properties in order to move to more expensive ones. as i see it, we are still in the process of stock level adjustment, as the level of mortgage indebtedness at 27 % of gdp is

rating agencies play in structured credit markets. the growing complexity of instruments has clearly induced some investors to overly rely on ratings. this is the more risky as ratings in structured finance are not yet as much tested as those of corporate issuers. some investors may also have misinterpreted the risk dimensions covered by a rating. against this background there is probably scope to improve the information content of ratings and to make the monitoring process more transparent. it also needs to be investigated further to what extent conflicts of interest may have arisen for rating agencies in their credit risk assessment of structured credit instruments. several international fora are currently looking at those issues. fourth, the turmoil has revealed some challenges for the liquidity management of banks. banks, including those in continental europe, have increasingly relied on secured funding, both via securitisation and off - balance sheet vehicles. this has rendered them more vulnerable to a sudden disruption of structured credit markets. let me recall that the regulatory framework requires eu banks to have policies and procedures for the measurement and management of net funding positions on an ongoing and forward - looking basis and have in place contingency funding plans. in this context, recent events have demonstrated that banks need to further strengthen their liquidity risk stress - tests, encompassing for example scenarios such as a protracted closure of a broad range of securitisation markets and the drawing of contingent liquidity obligations by commercial paper programmes. moreover, those elements should also be incorporated into their contingency funding plans. the ecb, together with the escb banking supervision committee, is carrying out work on this important topic. indeed, the current turmoil has underscored the importance of robust liquidity management by banks, as well as the need for supervisory approaches which keep pace with structural market developments. many initiatives with a view to addressing issues and risks arising from the recent financial market turbulence that go into the right direction have already been launched, both at the international level, namely by the financial stability forum, and at the eu level, with the ecofin agreeing to a roadmap for action by 2008, and also by the private sector. they must be pursued now with even stronger impetus. in this respect, co - ordination at the global level should be ensured. in closely interlinked financial markets, any policy measure should be agreed to and consistently applied at the international level. fifth, in the same vein, there is a need to reflect carefully on the “ originate - anddistribute ”