On the other hand, if what we are seeing is the beginning of a structural shift from bank to non-bank financial intermediation, we have to keep a close eye on the potential risks that might be building up. Indeed, there may be little long-term value in shifting risk from a highly regulated sector to a lightly regulated one, particularly if more and more lending is taken up entities that fall outside the regulatory reach. Conclusion Let me conclude. My message today is simple: the euro area financial system has been hit by a major shock, which few of us foresaw, but through good policy choices it is possible to steer this development towards a positive outcome, while avoiding unintended negative consequences. And looking at the developments across the euro area today, in my view the right choices are being made. Banks are already strengthening their capital as a result of the comprehensive assessment. The European supervisor will be fully operational in November this year. From next year we will start building up a single fund for European bank resolution. And initiatives are underway to strengthen access to finance for SMEs, especially through securitisation. For Asia, there is every reason to be confident that the euro area is addressing the structural problems in its financial system, which should in turn support more sustainable growth in Europe and for the world economy.
Yves Mersch: Finance in an environment of downsizing banks Keynote speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Shanghai Forum 2014 “Asia Transforms: Identifying New Dynamics”, Shanghai, 24 May 2014. *  *  *  Ladies and gentlemen, Thank you very much for inviting me to speak today. Europe and Asia have an increasingly symbiotic relationship. In 2013 total EU trade with Asia reached € trillion, almost double the value recorded a decade ago and representing over one-third of total EU trade. At the same time, the EU accounted for almost 30% of Asian trade last year, far ahead of any other trading partner, including the United States. The EU is also a major investor in Asia, and vice versa. Around 20% of EU outward investment goes to Asia, while 20% of inward investment originates in the region. In other words, the economic situation in Europe today has important consequences for the growth trajectory of Asia – and this is a relationship that will likely only increase in strength in the future. I would therefore like to use my remarks to discuss developments in Europe as part of the growth equation for Asia. Asian policy-makers know best the domestic challenges that face them and the types of solutions that are needed. The European situation is no doubt a complex one, but if there is a common factor in the crisis and its persistence, it is the difficulties of the euro area banking sector.