: mit press. lusardi, a. ( 2010 ), “ the importance of financial literacy ”, presentation to the conference on household finance and consumption, luxembourg city, 25 – 26 october 2010. bis central bankers ’ speeches another advantage of survey data is the possibility of collecting information on households ’ attitudes, beliefs and expectations. this allows researchers to establish a connection between behavioural traits and observed financial decisions. for example, in the hfcs, households are asked about the amount of risk they are willing to take on when making financial investments or whether over the next year they expect their income to go up more, less or about the same as prices. in the next couple of days we will listen to presentations on how gamblers manage their personal finances or how important are the presence of loss aversion and narrow framing, two of the most prominent aspects of prospect theory, for portfolio choice decisions. the study of household finance has much to say on the causes and consequences for the economy of the current financial crisis. the 2007 crisis, which originated in the us, is labelled the “ sub - prime crisis ”, and it is rooted in the excessive accumulation of debt by households which did not have the appropriate buffers to repay their debt in case of a negative shock. as policy - makers we should be deeply interested in knowing where the risks are concentrated in the household sector, how much of a threat they pose to other agents in the economy, which kind of shocks households are more vulnerable to. and should we, as policy - makers, worry about a house price decline, a rise in unemployment or a stock market bust? how exposed is consumer demand to declines in prices of different assets? how will financial losses of individual households impact on public finances? tomorrow morning we will hear about some of these topics and in particular about the effect of macroeconomic experiences on households ’ risk - taking behaviour and portfolio choice, the effect of credit supply shocks on asset allocation and the consumers ’ demand for cash in an after - crisis scenario of low interest rates. the closing session of the conference will deal with the topic of cross - country wealth comparisons. explaining household wealth differences across countries is not as easy as casual observers might think. there is a plethora of factors involved in the wealth accumulation process. public comments on the first wave of the survey last april confirmed the usefulness of a careful analysis and explanation of cross - country wealth differences, as was done in the explanatory documents. 8 the papers

border inter - bank loans and cross - border holdings of securities have, in relative terms, experienced substantial growth. for example, although domestic loans granted between monetary financial institutions ( mfis ) still account for more than 50 % of the total of eu mfi loans, the respective euro area cross - border activity has increased from around 15 % at the end of 1997 to around 23 % at the current time. capital market - related 6 / 11 activities have been even more impressive. while securities issued by non - mfis of another euro area country accounted for around 15 % of the securities held by euro area mfis at the end of 1997, this share has now reached almost 40 %. by contrast, integration in retail banking has not progressed to any great extent. this is suggested by both price and quantity - based indicators. integration in the retail banking markets can be measured by the cross - country dispersion ( standard deviation ) of interest rates on consumer credit, lending for house purchase and deposits with an agreed maturity, with a high degree of cross - country dispersion indicating a low degree of integration. our finding was that the degree of dispersion remains relatively high. this picture of a comparatively low degree of integration is also borne out by the level of banks ’ cross - border retail lending activity within the euro area, which, while increasing slightly from around 2 % at the end of 1997 to around 3. 5 % today, remains low. let me now make a few brief comments on an important retail market, namely the european mortgage market. the importance of this retail market segment is evident from its size alone : an outstanding volume of more than eur 4 trillion in residential mortgage debt in the eu, corresponding to around 40 % of eu gdp. very clearly, there are costs incurred through incomplete integration, such as the costs for households arising from differences in prices and products, and for issuers and investors as a result of unrealised economies of scale and higher funding costs. indeed, the secondary market for mortgage funding is still quite fragmented within the eu. overall, retail funding via deposits still accounts for the largest part of the funding of mortgage loans. however, securitisation is becoming more and more important as the markets for covered bonds ( i. e. on - balance sheet securitisation ) and mortgage - backed securities ( i. e. off - balance sheet securitisation ) are growing. for example, euro - denominated bonds covered by