has adopted : the ecb considers a market for a given set of financial instruments or services to be fully integrated when all potential market participants in that market ( i ) are subject to a single set of rules when they decide to deal with those financial instruments or services, ( ii ) have equal access to this set of financial instruments or services, and ( iii ) are treated equally when they operate in the market. let me now explain our definition of financial integration in more detail. one can say that a financial system consists of three principal components, namely the financial markets, the related financial infrastructure and the financial institutions. the ecb ’ s definition of financial integration uses the term “ market ” in a broad sense, covering all possible exchanges of financial instruments or services, be it on an organised market, such as a stock exchange, or an over - the - counter market created by a financial institution ’ s supply of a financial instrument or service. furthermore, a financial market can never be fully integrated without the integration of the related market infrastructure, in particular the payment and securities clearing and see the article entitled “ the contribution of the ecb and the eurosystem to european financial integration ” in the may 2006 issue of the ecb ’ s monthly bulletin. settlement systems. in this sense, you should also note that the term “ rules ” as contained in the ecb ’ s definition is used in a broad sense, and includes features such as laws and regulations, supervisory arrangements, market conventions and self - regulation, and standards and practices related to financial infrastructures. finally, financial integration can also be fostered by financial institutions establishing branches and subsidiaries in other euro area countries or by two institutions merging across borders. the wide coverage of the ecb ’ s definition of financial integration is attributable to the fact that if only the first condition is fulfilled, i. e. the existence of a single set of rules for a given market, potential participants might still be discriminated against in terms of access to the market. consequently, the ecb ’ s definition includes a second condition whereby participants should not be discriminated against in their access to a market. the third condition for full financial integration is that once all potential market participants have accessed the market, they should be treated equally in their operations within that market. these latter two conditions in particular should also be seen within the general treaty provision that the eurosystem acts “ in accordance with the principle of an open market economy with free competition,

, it is easier for the central bank to support the economy as healthier banks tend to lend more. the worst case, to say it very bluntly, is of a central bank providing liquidity to banks just to buy or carry legacy assets, and the banking sector doesn ’ t restructure. this was typically the japanese situation in the early 2000s. perhaps paradoxically, a rigorous aqr and stress test helps monetary policy. appropriately treating banks ’ holdings of sovereign debt according to the risk that they pose to banks ’ capital makes it unlikely that the banks will use central bank liquidity to excessively increase their exposure to sovereign debt. this is because banks will be wary of the constraints placed on sovereign debt by the stress tests to which they are subject at the same time. therefore, should the procyclical impact of the aqr be significant, then monetary policy would be able to act – without hesitation and being reassured that the side effects of a liquidity injection that we have seen for the 2011 – 2012 operations would be minimised. so how would you assess whether the aqr was procyclical? don ’ t forget we have our two pillar approach : we analyse the business cycle, but we also look at money and credit. we will see from the second pillar very quickly if the credit situation doesn ’ t improve. at this stage of the recovery, what we see at the moment is quite normal. the big corporate firms do not have as many constraints as the smes. they have around €2trn in excess cash, they can access debt markets. the reluctance to invest comes more from the business confidence side. and if you did act because of the impact of the aqr, what exactly would you do? depending on the situation, the central bank can decide on the most effective way liquidity provision can be provided. there are no restrictions on the way a central bank provides liquidity to the banks via repo, a priori. bis central bankers ’ speeches you want to reach your price stability objective. at the same time, you want to be sure that when you provide liquidity against adequate collateral, it doesn ’ t reduce the incentive to restructure the banking sector. and so by having a well - designed comprehensive assessment – like the one we ’ re preparing now – we are easing the job of the central bank. bis central bankers ’ speeches