Mergers – or, I should rather say, their absence in light of the recent past – are always prominent in press headlines. In this respect, let me reiterate that mergers may be a means for securing gains in efficiency and profitability, but they are very complex operations and the attendant business plans must be appropriately assessed. 10/15  We have seen a 30% reduction in the number of institutions there were in 2009. More recently we have seen how, in the absence of a context of acute crisis, many of the corporate operations announced do not reach fruition. Meantime, in some of the operations that are finalised, integration problems continue to be seen for years. Our task in a setting such as the present one is to ensure that any merger process should lead to the creation of a new, more solvent institution, with a sound business model, enabling structural costs to be cut and, in short, value to be generated. We must of course assess these same aspects with a view to potential cross-border mergers in Europe. The absence of such mergers may be seen as a sign that the Banking Union is not working as it should. True, several elements of the Banking Union are still not in place, including most notably the European Deposit Insurance Scheme (EDIS). It is likewise true that the regulations affecting the sector are still too heterogeneous across the different Member States.
Via the effects on inflation, asset prices are thus taken into account in the formulation of monetary policy, although they do not feature explicitly in the target variable. However, the simple use of financial asset prices as indicators is not a panacea for the central banks’ forecasting problems. Asset prices can move for a variety of reasons. Understanding those reasons is important in determining the appropriate monetary policy response. For example, if a rise in share prices stems from increased productivity and thus from expectations of higher future profits, the implications for monetary policy would be very different from a case with no such fundamental reason for the higher share prices. This raises a number of questions. The first pertains to the relative informativeness of different kinds of asset prices. The second is how to integrate the information obtained from asset prices with other macroeconomic information. Notwithstanding the empirical evidence of the indicator properties of asset prices, the causal relationships between asset prices and real macroeconomic variables have 1  BIS Review 51/2000  proved to be more difficult to understand and model. But, as I have just illustrated, the answers to these questions can be very important for monetary policy. It seems quite clear that central banks cannot afford to adopt a view of asset markets as merely “side-shows”. There can be other, sometimes less straightforward, situations where monetary policy has reason to react to movements in asset prices even though the effect on inflation is negligible.