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navigating challenging times : a closer look at europe ’ s financial system speech at the 21st annual symposium on building the financial system of the 21st century : an agenda for europe and the united states, organised by the program on international financial systems and harvard law school 10. 05. 2023 | kronberg | sabine mauderer check against delivery. 1 introduction 2 recent financial market developments 3 towards a single european capital market 4 conclusion 1 introduction ladies and gentlemen, in response to the high and persistent inflation across the euro area, the ecb ( european central bank ) has tightened its monetary policy stance. since last july, we have raised our policy rates by a combined 375 basis points. to support this restrictive stance, the eurosystem has also started to wind down its asset purchase programme ( app ( asset purchase programme ) ). since march, we are gradually reducing our bond holdings – currently at a pace of 15 billion euro per month on average until the end of june. we will continue to decrease our app ( asset purchase programme ) portfolio at a measured and predictable pace. we expect to stop the reinvestments as of july. of course, the tightening of monetary policy has significant consequences for the financial sector. it has put the spotlight on funding, interest rate and liquidity risk. today, i would like to shine a light on recent developments in europe ’ s financial markets. i will explain why this is different from 2008, and look at what is next for europe ’ s financial system. 2 recent financial market developments 2. 1 an episode of tension in europe ’ s financial markets financial markets on both sides of the atlantic went through several challenging weeks in march and april. the collapse of silicon valley bank in the united states and the demise of credit suisse threw sections of the financial markets into turmoil and shook confidence in parts of the banking system. bond market volatility surged, liquidity was strained. banks ’ credit default swaps ( cdss ( credit default swaps ) ) widened sharply and bank stocks plummeted globally. major central banks took coordinated action to ensure access to dollar liquidity as well as broader liquidity provision. the eurosystem, for instance, conducted daily tender operations in us ( united states ) dollar through april. the uptake of these operations was very limited – a sign that banks could readily draw on dollar liquidity in the market. more recently, tensions in the banking system have eased significantly – partly supported by better than expected quarterly earnings reports