) initiative, led by aci – the financial markets association. the purpose of this initiative is to promote the convergence of standards and practices prevailing in the european short - term securities markets, which is expected to provide an impulse towards integration, thereby increasing the market ’ s depth and liquidity. the promoters of this initiative expect the first steplabelled programme to be issued early this year. the eurosystem acts as a catalyst and supports this market - led initiative. in particular, it will provide technical support for the labelling process for some time and will produce and publish step statistics on yields and volumes. i will now move on to the government bond market. government bond markets have achieved a very high degree of integration, mainly due to the disappearance of intra - euro area exchange rate risk and the convergence of inflation expectations across countries by the time the euro was introduced. since then, government bond yields in different euro area countries have been driven mainly by euro areawide factors and news. a simple way to quantify the degree of integration in this market segment is to look at developments in the standard deviation of yield spreads over time : the lower the dispersion, the higher the degree of integration. our respective indicator shows a significant drop in the run - up to the start of monetary union and, since then, the standard deviation has remained close to zero. another indicator is the “ beta - convergence ”, that is based on the economic intuition that the more integrated the market is, the more bond yields should react to common factors instead of local factors. the “ betas ” represent the estimated correlation of changes in a government bond yield of a given country with changes in a respective benchmark bond. it results that the betas varied substantially up to 1998 and converged afterwards towards the integration level. with a daily turnover of around €250 billion, the euro interest rate swap market is about one third larger than the equivalent us dollar segment ( around €160 billion ). the total of euro interest rate otc derivatives contracts reaches a daily turnover of around €380 billion, and is thereby larger than the us dollar segment ( a daily turnover of around €290 billion ). see bis triennial central bank survey – foreign exchange and derivatives market activity in 2004 ( march 2005 ). let me stress here an important point. in assessing the indicators of the financial integration of european government bond markets, it of course has to be borne in mind that movements related to changes in the credit risk perceptions by

, in the first place within the committee of european banking supervisors. for transnational groups supervisory panels are at work, formed by the authorities of all the countries in which a group is present and coordinated by the authority responsible for consolidated supervision. the bank of italy chairs the panels for unicredit and intesa sanpaolo and participates in many others. the exchange of information and experience is continual, the climate of cooperation excellent. it is necessary to extend harmonization gradually from supervisory rules to supervisory practices : more effective action, equal conditions of competition, a lighter burden on banks, especially those present in different countries, are the objectives. further harmonization of the rules on own funds and risk concentration appears urgent. it will also be necessary to design common criteria for stress tests and work for the adoption of a homogeneous prudential statistical reporting format. in the coordination fora the authorities have conducted simulations to prepare for the crisis of a large bank. one learns a great deal from these exercises, and it would be a good thing if they were held more often. principles and procedures for the allocation of tasks and responsibilities are being defined ; the process must be completed rapidly. a strengthening of the role of the cebs will speed up convergence of supervisory practices and simplify cooperation between authorities. thought also needs to be given to the possibility of emphasizing the position of the coordinating authority in supervisory panels by giving it the role of lead supervisor, with greater powers on the group ’ s subsidiaries for purposes of preventing and managing crises. however, the remaining differences between countries in deposit insurance, insolvency procedures and the rules on the transfer of assets between units of the same group could seriously complicate the management of a crisis. eliminating or attenuating these differences must be placed on the legislative agenda at national and european level. banks, firms and innovative products bank ’ s dealings with firms now embrace not only the provision of loans and payment services, but also the supply of innovative financial services, including risk management products. these can increase the efficiency of the system and be a growth opportunity for banks, provided the customer is given complete information, the seller fully understands the product and the bank ’ s top management, whose duty it is to appreciate these products in all their complexity, is clearly aware. banks provide an important service to firms if they assist them in selecting instruments suited to their characteristics. the purpose must be the hedging of risk, not anything else. to encourage customers to assume financial risks rather than hedge