of changes in key interest rates to money market rates, and along the money market yield curve to longer maturity rates and then to retail interest rates, has become more differentiated. in addition, the market for sovereign debt, which is essential for the functioning of the interest rate channel, has become severely disrupted in a number of euro area countries. this implies that monetary policy impulses have been transmitted differently in the various euro area countries. eurosystem market operations and financial integration the eurosystem has become increasingly active in its market interventions since the outbreak of the financial crisis. this is not unusual : history shows that financial crises tend to broaden the operational boundaries and range of responsibility of central banks, as these take on a larger share of financial intermediation in the economy. in doing so, central banks perform, in a centralised way, a function that decentralised private markets are incapable of or unwilling to provide, and consequently they take on greater risks in their balance sheets. the unconventional monetary policy measures taken by the eurosystem were motivated by the pressing need to avoid disruption to the monetary policy transmission mechanism. in response to the fragmentation of interbank markets, the ecb has adopted several measures to temporarily complement impaired intermediation in the interbank market by increasing intermediation via the central bank. these non - standard measures range from the fixed - rate full allotment tender procedure to foreign currency operations and, more recently, to a temporary broadening of the collateral pool. most notably, the ecb introduced 12 - month refinancing tenders and subsequently conducted two 36 - month operations at a time when the sovereign debt crisis was hampering euro area banks ’ access to market - based funding. the exceptionally long maturity of these operations provided banks with a longer horizon for their liquidity planning, mitigating the funding pressure they were experiencing around the turn of the year. in addition, it gave them the necessary breathing space to deleverage in an orderly manner over the medium term. the evidence we have confirms that this measure was critical in avoiding disorderly asset sales and a downscaling of longer - term lending. with hindsight, the eurosystem ’ s operational framework has proven to be effective and flexible during the crisis, adjusting well to difficult conditions. however, there is a limit to what market operations alone can achieve. they can neither address the underlying causes of the bis central bankers ’ speeches deterioration nor completely offset its effects. the stability and functionality of financial

peter praet : european financial integration in times of crisis speech by mr peter praet, member of the executive board of the european central bank, at the annual general meeting and conference 2012 of the international capital market association ( icma ), milan, 25 may 2012. * * * i would like to thank ignazio angeloni and steoffphanie stolz for their contribution to the preparation of this speech. it is my pleasure to be here today at the annual icma general meeting. in the last 40 years, ever since european capital markets acquired a global importance, the international capital markets association has played an important role in promoting contact, information exchanges and initiatives among issuers, managers, dealers and investors active in international financial markets. a central goal of icma is to foster the openness and competitiveness of financial markets, globally and in europe. this is an objective that the ecb wholeheartedly shares. in times of crisis, more than ever, we need effective action, so that we can achieve this goal. the topic of my talk today is financial integration in europe : its meaning, its importance, recent developments, and – not least – why the ecb cares about it, and what the ecb does to preserve it. well - developed capital markets are important – as we all know – because they channel funds from savers to investors, promote the efficient use of resources and create more opportunities for individuals and firms, ultimately leading to higher growth. but this is not yet sufficient in a multi - country setting. a united europe, especially one that has decided to have a single currency, needs united financial markets as well. financial integration – that is the cohesion of financial markets and their ability to operate as a single entity – enhances these benefits and gives them a cross - country dimension. not surprisingly, a single market for capital and financial services has been a central goal of the european union for decades. many policy initiatives have paved the way to greater financial integration, the most ground - breaking of which being, without a doubt, the introduction of the euro. this progress towards financial integration was interrupted and reversed by the global financial crisis and, more recently and dramatically, by the european sovereign debt crisis. i will first talk about why integrated financial markets are important, for europe in general and for the conduct of the single monetary policy of the ecb in particular. i will then explain the role the ecb plays in this area. next i will focus