of a financial institution by itself nor applying modern strategies are guarantees of quality. the process of concentration in the banking industry will continue and probably result in fewer banks as well as a general increase in the size of units. mergers in germany are in many cases welcome, as they improve the viability of institutions. the idea here is to safeguard the diversified nature of business inherent in the universal banking concept through suitably sized banks. the situation is different in the united states, where mergers sometimes take place in order to surmount the restrictions on business imposed by the specialised banking system and to achieve a higher level of diversification. mega - mergers have the disadvantage of making structures less transparent and groups more difficult for management to control. on the whole, the number of institutions which, in terms of systemic risks, are “ too big to fail ”, will rise. alternatively or complementary to the massive growth we are seeing in many places at present, specialisation, the return to core business or measures denoted by the term „ lean banking “, i. e. the attempt to reduce costs by outsourcing activities, shrinking the range of in - house banking services or purchasing outside services. from an economic point of view these may be important strategies for the banks in the future, but outsourcing must never affect regularity of business or the possibility to control business for the management as well as for the supervisory authorities. fourth statement : changes in the banking scenery also affect supervisors - supervision must be kept efficient, time has not come for an „ outsourcing “ of core functions of supervision. supervisors must also react on global integration. one proposal to reform supervision is to leave supervision and development of supervisory concepts to a large extent to the market, respectively to a small group of global players. supervisors are open to new approaches. there are, however, some fundamental reservations against this proposal. the current proposals of self regulation do not respect the context between stipulating risk control norms and the responsibility for preventing systemic risks. more self regulation would simultaneously require that market participants take over major responsibility for preventing systemic risks and therefore setting up private agencies to intervene during liquidity crises. but as long as private institutions are not prepared to install such agencies and to take over responsibility for systemic risks, time for outsourcing of essential elements of supervision has not come. fifth statement : in the information age, central banks can operate as an anchor of prudential supervision owing to their “ natural ” presence in the market. the central bank establishes

expected to remain weak but should decline less strongly than was the case in the first quarter of 2009. looking ahead into next year, after a phase of stabilisation, a gradual recovery with positive quarterly growth rates is expected by mid - 2010. the significant policy stimuli in all major economic areas should support growth globally, including in the euro area. in the view of the governing council, the risks to the economic outlook are balanced. on the positive side, there may be stronger than anticipated effects stemming from the extensive macroeconomic stimulus being provided and from other policy measures taken. confidence may also improve more quickly than currently expected. on the other hand, concerns remain relating to a stronger or more protracted negative feedback loop between the real economy and the turmoil in financial markets, further increases in oil and other commodity prices, the intensification of protectionist pressures, increasingly unfavourable labour markets and, lastly, adverse developments in the world economy stemming from a disorderly correction of global imbalances. with regard to price developments, annual hicp inflation was, according to eurostat ’ s flash estimate, - 0. 1 % in june, compared with 0. 0 % in may. as explained on previous occasions, the further decline in annual rates of inflation was anticipated and reflects primarily base effects resulting from past sharp swings in global commodity prices. looking ahead, owing to these base effects, annual inflation rates are projected to remain temporarily in negative territory over the coming months, before turning positive again. such short - term movements are not relevant from a monetary policy perspective. consistent with available forecasts and projections, looking further ahead, inflation is expected to remain in positive territory, while price and cost developments are expected to remain dampened in the wake of ongoing sluggish demand in the euro area and elsewhere. in this respect, indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the governing council ’ s aim of keeping inflation rates below, but close to, 2 % over the medium term. risks to the outlook for inflation are broadly balanced. on the downside they relate, in particular, to the outlook for economic activity, while on the upside they relate to higher than expected commodity prices. furthermore, increases in indirect taxation and administered prices may be stronger than currently expected owing to the need for fiscal consolidation in the coming years. turning to the monetary analysis, the latest data confirm a continued deceleration in monetary dynamics. in may, the annual growth rate of m3 declined