, ecb ; section 3. 5. 2 of altavilla, c., lemke, w., linzert, t., tapking, j. and von landesberger, j. ( 2021 ), “ assessing the efficacy, efficiency and potential side effects of the ecb ’ s monetary policy instruments since 2014 ”, occasional paper series, no 278, ecb ; and work stream on employment ( 2021 ), “ employment and the conduct of monetary policy in the euro area ”, occasional paper series, no 275, ecb. 11. lane, p. r. ( 2022 ), “ bottlenecks and monetary policy ”, the ecb blog, 10 february. 12. the rising prices of manufacturing exports have partly offset rising import prices. 13. lagarde, c. ( 2022 ), “ monetary policy in an uncertain world ”, speech at the “ ecb and its watchers conference xxii ” conference, 17 march. contact european central bank directorate general communications sonnemannstrasse 20 60314 frankfurt am main, germany + 49 69 1344 7455 media @ ecb. europa. eu reproduction is permitted provided that the source is acknowledged. media contacts copyright 2022, european central bank

, it risks creating a vicious circle as a low price - to - book ratio means that it is expensive for banks to issue equity, which might impinge on their ability to raise capital through financial market channels in a cost - effective way. towards banking union this is where banking union comes in. the transposition to the european level of financial sector policies through building a strong banking union can play a pivotal role in rebuilding trust in the euro area banking sector. hoenig, thomas ( 2013 ) “ basel iii, a well - intended illusion ” remarks at the international association of deposit insurers, ( available in the fdic site ) bis central bankers ’ speeches banking union has for now two key components : the single supervisory mechanism ( ssm ) and the single resolution mechanism ( srm ). the creation of a european deposit guarantee scheme which the third component has been postponed for the medium term. the creation of the ssm, which we expect to be operational next year, should increase confidence in the euro area banking sector through two main channels. first, the ssm will provide reassurance to investors that supervision is consistent and effective across all participating countries. the ssm will operate as a single system, with a common supervisory manual applying to all participating banks. the ecb will directly supervise large, systemically relevant banks. while it would be inefficient for the ecb to supervise directly the thousands of remaining smaller banks, we will have the authority to take over supervision of any small bank or group of banks at any moment if deemed necessary. this means there will be no “ blind spots ” from which financial instability could emerge. second, the implementation of the ssm should reduce concerns about hidden losses on banks ’ balance sheets. in accordance with the ssm regulation, the ecb will conduct a “ comprehensive assessment, including a balance - sheet assessment ” of all banks supervised directly. this will apply to around 130 banking groups operating in the euro area, which account for around 85 % of euro area banking assets. the assessment will involve a balance sheet assessment including an asset quality review to be conducted by the ecb. this will then feed into the overall stress test to be conducted by eba, in cooperation with the ecb. the results of both exercises should be ready before we start actually supervising the banks next year. we want this assessment to be as rigorous as possible. consequently, we are prepared for the fact that it may reveal capital needs. if so, the