of emu in 1999, which compares very favourably with the somewhat more than two million increase in the eight years before 1999. according to the latest spring forecast by the european commission, prospects are for another 3. 8 million employed persons in the euro area in the period 2007 - 08. financial regulation, supervision and stability let me now turn to an issue you have asked me to discuss today, which is the framework for financial regulation, supervision and stability and the way in which it can cope with the challenges stemming from increasing financial integration. starting with financial regulation and supervision, the lamfalussy framework was introduced with the purpose of speeding up the process of adopting community legislation and making its implementation more consistent at the national level in line with the needs of the single financial market. as such the lamfalussy framework represents in itself an important institutional innovation and therefore we have always shared the stance that it should be exploited to the maximum possible extent before considering any far - reaching institutional changes. this entails in practice that all four levels of the approach should work at their best and, when this is not the case, appropriate measures should be taken. it is therefore important – as it has been the case so far – to monitor systematically the concrete implementation of the framework to identify areas for possible enhancement. while at the beginning, the monitoring activity concentrated on the regulatory part of the approach ( notably the level 1 and 2 ), the focus has rightly turned more recently to the supervisory level ( i. e. the level 3 ). one of the main challenges concerning the level 3 activity is to ensure that the deliberations taken by the supervisory committees concerning co - operation and convergence are applied consistently in practice. in this respect, the concrete implementation of the recommendations contained in the report on financial supervision prepared by the financial services committee and endorsed by the ecofin council on 5 may 2006 represents certainly an important milestone. more generally, the forthcoming review of the lamfalussy process represents an important occasion for further reflections about the efficiency and effectiveness of the current eu supervisory setting. in this context, an important objective of the review should be the identification of concrete measures to further strengthen the supervisory role of the level 3 committees. turning to the framework for financial stability, the ecb supports in general the current discussions at the eu level to enhance the arrangements for handling financial crises, never forgetting that a crucial responsibility must remain with the private sector itself. it is important indeed that all competent authorities for financial stability, namely central

( smes ) access to finance, the report also analyses how financing patterns differ across large, medium and small enterprises. finally, the report discusses the recent trends observed in the corporate finance landscape of the euro area over the past few years and how they have influenced the availability of external finance for firms. let me briefly summarise some of the results contained in the report : first, firms ’ financial structures are relatively homogeneous across euro area countries. still, even after taking into account the average firm size and sectoral composition across countries, some crosscountry differences remain which may be explained by the remaining differences among legal and institutional frameworks. second, regarding smes, the report indicates that several of the differences in the financial position of firms according to size which had been identified in previous studies are driven mainly by the relative weights of smes and large firms in the various sectors, and also to some extent by the relative weights of smes in the various countries. at the same time, the report also highlights that some differences across size classes remain regarding the reliance on bonds and the share of financial to total assets – which is lower for smes – and in terms of the reliance on bank loans and cash – which is higher for smes. the latter may point to the need of keeping liquid balances to finance future projects. small and medium - sized firms tended also to be in a somewhat weaker financial situation as indicated, for example, by their higher indebtedness. finally, concerning the role of financial intermediaries in providing finance to firms, a two - tiered process has been identified. firstly, bank lending has become even more prominent in the last two or three years. secondly, the link between the banking sector and the markets has been strengthened significantly, with commercial banks shifting from acting as traditional financial intermediaries to functioning as credit risk originators and sellers as a result of securitisation processes and the increasing use of credit derivatives. from the point of view of monetary policy, four main conclusions can be drawn. first, the growing importance of structured finance and increased competition between banks and other financial intermediaries may provide corporations with easier and cheaper access to external finance. second, as credit granted is evaluated on a more mark - to - market basis and the banking sector becomes more and more competitive, the speed of transmission of monetary impulses to bank interest rates is expected, ceteris paribus, to quicken. third, it is likely that credit