derivatives clearance activity is being pushed toward central counterparties and exchanges. in addition, the federal reserve and others are evaluating how greater transparency with respect to otc derivatives prices would improve financial stability. the committee on payment and settlement systems and the technical committee of the international organization of securities commissions are doing a review of standards for payment, clearing and settlement systems. this work will inform the efforts of the financial stability board to strengthen such standards. there is also work underway on the problem of how to ensure that financial institutions have compensation structures that curb rather than encourage excessive risk - taking. finally, it is critical that we ensure that no firm is too big to fail. this is about both fairness and having proper incentives in the financial system. having some firms that are too big to fail creates moral hazard. these firms are able to obtain funding on more attractive terms because debt holders expect that the government will intervene rather than allow failure. in addition, too big to fail creates perverse incentives. in a too - big - to - fail regime, firms have an incentive to get large, not because it facilitates greater efficiency, but instead because the implicit government backstop enables the too - big - to - fail firm to achieve lower funding costs. to solve the too - big - to fail problem, we need to do two things. first, we need to develop a truly robust resolution mechanism that allows for the orderly wind - down of a failing institution and that limits the contagion to the broader financial system. this will require not only domestic legislation, but also intensive work internationally to address a range of legal issues involved in winding down a major global firm. second, we need to reduce the likelihood that systemically important institutions will come close to failure in the first place. this can be done by mandating higher capital requirements, improving the risk capture of those requirements and by requiring greater liquidity buffers for such firms. although the raging crisis appears to be over, our work is not close to being complete. making sure this work keeps moving forward and is coordinated internationally is hugely important. differences in views across countries and regions should not divert the international community from the more important prize – taking the actions collectively that will ensure a robust and resilient financial system.

capital. in other words, the european economy grows more, the more integrated its financial system is. for example, according to a study ( london economics, 2002 ) 1 additional growth – resulting from financial integration of the european bond and equity markets – of 1. 1 % over a period of ten years is estimated. it is against this background that the ecb strongly supports the commission ’ s policy of pushing forward the lisbon strategy by focusing reform efforts, at the national level and the european level, on “ delivering stronger, lasting growth, and creating more and better jobs ”. one of the ecb ’ s most effective contributions to these efforts is to continue to act as a strong and reliable anchor for safeguarding monetary stability, thus providing a vital element for promoting sustainable output growth. however, the relationship between monetary policy and structural reforms like european financial integration is reciprocal, in the sense that the elements are mutually beneficial. most importantly, an integrated financial system promotes the smooth and effective transmission of monetary policy throughout the euro area. london economics ( 2002 ), “ quantification of the macro - economic impact of integration of eu financial markets ”, report to the european commission. furthermore, i would like to mention that the integration of the financial system is highly relevant to our task of maintaining financial stability. deeper financial integration, on one hand, has a higher capacity to absorb economic shocks than individual countries. it can also offer more possibilities for financial institutions to manage and diversify their relevant risks and realise economies of scale, which leads to greater efficiency of the financial system. on the other hand, deeper financial integration is transforming the nature of the risks all over europe, particular attention being given to systemic risk stemming from contagion through intensified cross - border links ( for instance infrastructure, interbank exposures, shareholdings and participation ) and to moral hazard issues resulting from much larger institutions posing as a consequence much larger risks in case of failure. therefore, the interaction between financial integration and financial stability deserves thorough analysis and consideration. having discussed the economic benefits of financial integration, let me now talk about the actors involved as well as the state of financial integration in europe. the actors involved and the state of financial integration in europe the main actors involved in the process of financial integration are the public authorities and the private sector. financial integration is a prime objective of the general economic policies of the european union. charlie mccreevy, the european commissioner for internal market and services, has explained the commission ’ s proposed line of