spreads against the secured segments up to five times their historical average. in order to facilitate a better distribution of liquidity, the ecb launched further liquidity providing fine - tuning operations as well as provided additional liquidity through its main refinancing operations. the ecb also launched two supplementary longer - term refinancing operations ( ltro, with a maturity of three months ), respectively on 27 august and 12 september, for a total amount of eur 115 billion. the purpose of all these operations should be made clear. first, these operations did not add to the overall stock of liquidity provided by the ecb over the maintenance period within which banks have to meet their reserve requirements. second, the additional allotments at the main refinancing operations simply altered the timing of the provision of the usual amount of liquidity within the maintenance period, by accommodating a preference of banks for socalled “ frontloading ” ( i. e. holding a higher level of reserves at the start of the maintenance period rather than at the end ). third, the longer term operations were not intended to directly steer interest rates at longer maturities, such as three months. rather, by changing the timing of liquidity provision within the maintenance period and increasing its average maturity, the ecb aimed to bolster the confidence of market participants that they would not be subject to shortages of liquidity at the end of the maintenance period when reserve requirements became binding and / or at times when outstanding obligations had to be rolled over in an uncertain market environment. largely on account of these measures, the situation in the overnight money market has improved, with the overnight interest rate being both more stable and closer to the minimum bid rate determined by the governing council in recent weeks. improvements in the term unsecured money market have been more modest, although conditions have improved throughout october. • the pragmatic reaction of the ecb regarding the liquidity policy decisions at early stage of the turbulences had the goal to reassure the market, to reduce the deviation of the overnight interest rate from the minimum bid rate and to build up confidence of market participants. there was a need to contribute to the continuation of the trading in the money market, which is the kernel of the banking system through which financial institutions find in first instance their liquidity needs. • while it is premature to form a final judgement, in the context of recent experience, the operational framework of the eurosystem has proved to be

lorenzo bini smaghi : monetary union, regulation and supervision speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the 9th annual european financial services conference “ taking stock of reform : fragmentation or convergence? ”, brussels, 10 february 2011. * * * i wish to thank cecile meys and huw pill for their contributions to this speech. i remain solely responsible for the opinions contained herein. introduction the title of this session is “ assessing the eu ’ s re - regulation effort ”. to be clear from the outset, we are striving not simply for re - regulation, but for better regulation. what constitutes “ better ”? in my remarks this morning, i will offer a central banker ’ s view of where we should be heading in this domain – and of what work still needs to be done. as recent events have shown, the financial crisis has complicated the implementation of monetary policy, in particular by creating instability in the transmission mechanism. and, within a monetary union, differences between member countries – either created by the financial turmoil or exacerbated by it – have added to the uncertainty and complexity. during the crisis, the ecb has implemented a set of non - standard measures to address such concerns. we consider that these measures have been successful in ensuring that monetary policy remains effective. another important factor throughout the crisis has been the firm anchoring of inflation expectations, which strengthened our stance against deflationary pressures in the worst part of the crisis. such an anchoring is the result of all the decisions, each one of them, taken during the first decade of the euro. overall, we believe that our ability to maintain price stability remains unimpaired. the post - crisis world will face two potentially conflicting challenges. the first one is to achieve stronger financial integration as a factor of growth. in other words, we need more “ e ” in emu. deepening financial integration is a key aspect of the economic part of emu. deeper cross - border banking activities, especially at the retail level, are one way of achieving this objective. enhancing and harmonising the regulatory and supervisory framework across europe is a crucial step towards this goal. however, greater integration may imply greater risk of contagion, as financial systems, markets and institutions become more intimately entwined. better regulation means achieving both a more integrated european financial sector, with deeper markets and more diversified institutions as well as a more robust financial