projections will close by the end of this year. in figure 2, on the right, we see both the ecb ’ s inflation projections and the marketbased inflation expectations. you can see that both have increased since the beginning of this year, particularly short - term inflation expectations. this means that both the ecb and financial markets expect inflation rates to increase. at least temporarily – due to supply side factors like higher energy prices and supply side bottlenecks. the crucial question is, of course, how transitory these driving factors of inflation are. or how persistent they might turn out to be – thus leading to durably higher inflation. of course, our macroeconomic projections are based on a set of assumptions. they serve as a snapshot in time and are inevitably surrounded by uncertainty. that is precisely why the eurosystem closely and continuously monitors a broad array of inflation indicators – including those from financial markets. this allows for more real - time monitoring, but also helps to assess whether the models fully capture the inflation momentum and persistency. the market view on inflation developments therefore often serves as an important cross - check, both for the baseline scenario and the risks associated with it. currently, market - based inflation measures are close to multi - year peaks, both in the short and medium term. more specifically, the five - year five - year inflation - linked swap rate, an important market proxy for medium - term inflation expectations, hovers around 1. 8 % – the highest it has been since 2017. these market - based inflation measures can be broken down into an inflation expectation component and a risk premium component – which is the extra return investors demand to bear inflation risks. figure 3 shows that both components contribute to the rise in market - based inflation measures. if you look at the area marked in red in the bottom right, you can see that the negative inflation risk premium is vanishing quite rapidly. this means investors are again considering the possibility of higher inflation after a period of low inflation. it also suggests that investors increasingly price - out the risk of deflation. we can translate this to the balance of risks, which is the sum of upside and downside risks to our inflation outlook. for a long time, the balance of risks was tilted to the downside. however, today i will argue that the risks for headline inflation are again tilted to the upside. downside risks largely pertain to the demand effects of the delta variant of covid - 19. upside risks, in

in november 2018. the graph looks at the duration of funding. the line ‘ short term funding small definition ’ is the funding to be repaid within the next 30 days excluding open - maturity items, e. g. retail deposits. sample consists of dutch banks only. secondly, a greater focus was introduced on cross - border activities and consequently cross - border supervision. in europe we even went a step further and introduced joint supervision via the single supervisory mechanism. this strongly increased eu cooperation and harmonization, and improved the quality of supervision of all eu banks. the third improvement was the creation of a resolution regime. the resolution framework is implemented in eu legislation and the single resolution fund is being built up. it is approaching the halfway mark and within the next five years we should be able to reach the target level5. and, finally, supervision is also becoming more forward - looking. this includes, for instance, looking at the kind of corporate culture and conduct that has proven to be able to result in financial troubles further down the road. in the netherlands we were among the frontrunners here. this is not an easy issue to address, but it is gaining traction internationally, as demonstrated by the irish tracker mortgage examination6 and the australian parliamentary review of the four major banks7. this approach is now also an element of the ssm toolkit. the list of improvements is impressive, and worthwhile to consolidate. acknowledging nonetheless that the implementation of the reform agenda is not yet complete, i want to draw your attention to two challenges. the first challenge is confronting regulatory fatigue, and not forgetting the lessons of the crisis. although the crisis broke out only ten years ago, its memories begin to fade and in some corners of the industry a renewed push for deregulation can be heard. also we ourselves on the public side have been working on developing and implementing the reform agenda for close to ten years now. while tremendous progress has been made, the pace of implementation is not equally convincing everywhere. the exact target level of the srf depends on banks ’ covered deposit volume. irish central bank ( 2018 ) mortgage tracker examination australian standing committee on economics review of australia ’ s four major banks, for example, on the reform agenda for banks, the basel committee noted in october 2018 that several member jurisdictions are behind schedule in implementing the leverage ratio, nsfr and large exposure framework. this also hits close to home, as the eu is still working on the implementation of these last three standards. good news is that