extent means preserving the viability of the banking system. the eurosystem does so by providing banks with unlimited access at fixed rates to its refinancing operations ( of course, against adequate collateral ). more recently, the eurosystem has announced plans to purchase euro - denominated covered bonds issued in the euro area to provide further support to credit provision by the banking sector. these purchases will target an important segment of the private securities market, which has been particularly affected by the financial market turbulence and will contribute to achieve the objective of maintaining the availability of credit for households and companies at accessible rates. 2. 5 more weight given to asset prices in monetary policy? another interesting debate that has gained – for obvious reasons – renewed interest and strength over the past year is the role that asset prices should take in the monetary policy design. indeed, as we are experiencing at present, large volatility in asset prices can jeopardise the stability of the financial system and potentially undermine macroeconomic stability. the repetition of boom - bust cycles and the potentially very high costs for see cukierman, a. ( 2006 ), “ central bank finances and independence – how much capital should a central bank have? ”, in m. blejer and s. milton ( eds. ), the capital needs of central banks, bank of england press. macroeconomic stability associated with the typically abrupt reversal of asset price bubbles beg the question : should monetary policy give more weight to asset prices? there are various arguments that must be carefully weighed in order to answer this question. first, we know that bubbles are extremely difficult to identify in real time. assessing whether or not asset prices are being driven by fundamentals is surrounded with so much uncertainty — perhaps sometimes uncertainty in the “ knightian ” sense — that central banks should refrain from targeting asset prices. moreover, some hold the view that, while monetary policy actions can influence asset price developments, the magnitude of the swings in policy rates that would be needed to curb boom and bust cycles in asset prices at times of “ irrational exuberance ” could be so large as to have adverse implications for macroeconomic stability in the short term. 3 based on these arguments, which are broadly shared in the central banking and academic community, one policy view ( perhaps, the predominant view in the past years ) postulates that it is better to wait for the bubble to burst on its own and then ease monetary policy aggressively to provide support to the banking system and to the

view that a common currency and a common central bank actually determine a unified banking system. in a nutshell, access to a common source of central bank liquidity and a common money market – as well as confidence in the common currency – create strong interconnections between all banks operating in the single currency area. this is the case irrespective of whether we have pan - european banks, or whether discrepancies remain in local retail markets. the case of the united states is illustrative. even when strong inter - state banking limitations were in place – restricting retail banking activities to small local markets – the us banking system was, nevertheless, commonly viewed as a single system. illustrative facts the progress made with integration in wholesale activities has been rapid and remarkable. first, a common euro money market has been in place since the early days of the euro. a large number of financial products can be traded easily with minimal price distortions, small enough to prevent arbitrage across countries. likewise, data on cross - border trade flows provide a strong indication of market unification. in the case of the predominantly used unsecured interbank contracts, the share of counterparties from other euro area countries has more than doubled after the introduction of the euro. in addition, a large proportion of the activity in euro is conducted with counterparties outside the euro area, especially in london. the share of cross - border transactions is somewhat lower in the case of repo transactions, because of remaining legal and tax barriers and settlement difficulties. all in all, less than 40 % of all interbank market activity is now conducted with domestic counterparties. in 1998, the share was still over 60 %. second, the wholesale payment infrastructure for the euro area – including target, euro i and euro access frankfurt – is already very unified. payment flows in these systems again indicate a significant increase in cross - border interbank trading after the introduction of the euro. in terms of value, cross - border transactions currently account for 40 % of all kinds of target payments, for instance. the degree of integration is certainly lower for securities settlement, even though a process of consolidation has been taking place. third, the degree of integration of securities market activities is usually misjudged, since attention is focused on the costs and difficulties of individual investors when investing abroad. the picture is completely different for wholesale activities. the corporate finance markets for major customers are actually already quite highly integrated. to give an example, the share