has adopted : the ecb considers a market for a given set of financial instruments or services to be fully integrated when all potential market participants in that market ( i ) are subject to a single set of rules when they decide to deal with those financial instruments or services, ( ii ) have equal access to this set of financial instruments or services, and ( iii ) are treated equally when they operate in the market. let me now explain our definition of financial integration in more detail. one can say that a financial system consists of three principal components, namely the financial markets, the related financial infrastructure and the financial institutions. the ecb ’ s definition of financial integration uses the term “ market ” in a broad sense, covering all possible exchanges of financial instruments or services, be it on an organised market, such as a stock exchange, or an over - the - counter market created by a financial institution ’ s supply of a financial instrument or service. furthermore, a financial market can never be fully integrated without the integration of the related market infrastructure, in particular the payment and securities clearing and see the article entitled “ the contribution of the ecb and the eurosystem to european financial integration ” in the may 2006 issue of the ecb ’ s monthly bulletin. settlement systems. in this sense, you should also note that the term “ rules ” as contained in the ecb ’ s definition is used in a broad sense, and includes features such as laws and regulations, supervisory arrangements, market conventions and self - regulation, and standards and practices related to financial infrastructures. finally, financial integration can also be fostered by financial institutions establishing branches and subsidiaries in other euro area countries or by two institutions merging across borders. the wide coverage of the ecb ’ s definition of financial integration is attributable to the fact that if only the first condition is fulfilled, i. e. the existence of a single set of rules for a given market, potential participants might still be discriminated against in terms of access to the market. consequently, the ecb ’ s definition includes a second condition whereby participants should not be discriminated against in their access to a market. the third condition for full financial integration is that once all potential market participants have accessed the market, they should be treated equally in their operations within that market. these latter two conditions in particular should also be seen within the general treaty provision that the eurosystem acts “ in accordance with the principle of an open market economy with free competition,

market, let me now briefly discuss the state of integration of the financial infrastructure related to securities markets in general, namely the securities clearing and settlement systems. only if financial infrastructures are adequately integrated can the financial markets, like bond and equity markets, function smoothly. and this is one area where financial integration is still lagging behind and where action from market participants is required. let me first give some figures for the present situation. just by looking at the development of the number of systems in the euro area over time, we note that the number of central securities depositories declined from 22 in 1998 to 19 in 2005, and the number of securities central clearing counterparties declined from 14 to 7. this leads us to conclude that the number of securities clearing and settlement systems that are often not efficiently connected to each other is still rather high, in particular if we compare it to the significant progress that has been made in the integration of largevalue payment systems, with the overall number standing at 4, down from the 23 that existed before the introduction of the euro and the target system. the eurosystem strongly supports further integration in the securities clearing and settlement infrastructure. to this end, it also acts as a catalyst for private - sector activities and holds meetings with the banking and securities settlement industry of the euro area to discuss the further integration of the euro securities settlement infrastructures. i would also like to highlight the work that the european commission is investigating whether to propose a framework directive on clearing and settlement. i can tell you, the ecb would indeed welcome a legislative initiative in this field. having mentioned securities clearing and settlement as one major area where further progress in integration is required, i will now turn to the banking markets where, as i stated earlier, the degree of integration in the retail segment can be deemed to be unsatisfactory. let me first briefly present some facts concerning banking consolidation. the decrease in the number of institutions has been a common trend in eu member states ’ banking sectors. the number of credit institutions in the euro area declined from around 12, 000 in 1985 to 6, 400 in 2004. consolidation has been attributed mainly to mergers and acquisitions ( m & as ) between institutions, and much less to failures or voluntary liquidations. the data also show that consolidation has so far been a primarily domestic development. between 1985 and 2005, cross - border mergers accounted for only about 20 % of the number and value of all m & a deals in the euro area and the eu. cross -