But, at the same time, I do not think that cross-country differences in Monetary Union, which raise the potential for persistent divergence of economic performance, can or should be ignored. Looking forward, the financial crisis and its impact on the functioning of financial markets in some countries has led to a situation in which cross-country heterogeneity owing to differences in monetary policy transmission may be more pronounced than before the crisis – at least if effective remedial measures are not taken. This new environment has posed, and will continue to pose, challenges to the single monetary policy. How is the ECB dealing with these challenges? Since the start of the financial crisis, the ECB has implemented a set of non-standard measures, taking advantage of the range of instruments available within the Eurosystem’s framework for the implementation of monetary policy. Foremost among these measures has been the adoption of a fixed rate tender procedure with full allotment in the ECB’s monetary policy operations. In conjunction with the flexible nature of the Eurosystem’s collateral framework, these measures allow banks to obtain funding even in the face of market dislocation.5 This has avoided a disorderly deleveraging of bank balance sheets and the associated potential for a fire sale-driven, vicious downward spiral in asset prices and bank capital. In the face of the sovereign debt crisis these non-standard measures, supplemented by targeted asset purchases under the ECB’s Securities Markets Programme, have addressed and contained the country-specific impediments to monetary policy transmission.

Economic growth prospects are better, mainly thanks to the improved foreign demand and eased monetary conditions. Furthermore, payment in arrears to the private sector will begin this year, accounting for a considerable amount. We expect banks to assist in this regard for a smooth and effective process, and orient the cashed-in amount towards further lending to the economy. From this process, we expect the business restructuring to ease and their borrowing demand to grow. Likewise, the fiscal policy will gradually orient towards a steady consolidation process, which will create more room for lending to the private sector. The banking sector may serve as a catalyser to render the effect of such policies sustainable, and benefit maximally from them in the form of expanded activity, improved asset quality and enhanced income stability. As you know, last November the financial system was subjected to the IMF and WB appraisal. The banking industry was engaged in this process and I take the opportunity to thank you for this! Today, the IMF Executive Board is expected to approve the evaluation report. Overall, the financial system and its supervision infrastructure have managed to successfully weather the global financial crisis. In the meantime, risks facing it are analysed and assessed, and a series of actions that need to be taken are identified. For banks, the focus is on strengthening their human and technical resources to assess operational risks and undertake concrete actions to mitigate these risks. The need to improve asset quality and maintain financial soundness indicators is also a focal issue.