too big. hence they created a major risk for the stability of the european financial system. let me present some evidence provided by the esrb. first, consider the amount of lending. in the 1950´s, bank loans to the domestic private sector as a proportion to the domestic gdp were almost equal in europe, us and japan, at about 25 per cent. in 2010, the figure for europe was well over 100 per cent of the gdp, while that in japan was about 90 % and in the us only close to 50 %. 1 in some european countries, the size of the banking sector more than doubled in a mere 20 years between 1990 ’ s and 2010. among the countries that recorded the biggest increases were cyprus, iceland, ireland, spain, portugal and greece. bis central bankers ’ speeches second, european banks ’ balance sheets have ballooned. the total assets of the eu banking sector were over three times the eu gdp in 2013. in several eu countries, the ratio is much bigger. the japanese banking sector is more than half of the relative size of the european banking sector, but the us banking sector is only a quarter of the size of its european counterpart. third, the european banking system has also become more concentrated. since 2000, the share of the three largest domestic banks of the national banking system total assets – the so - called c3 ratio – has increased in all major eu countries except italy. ( in finland, of which i am the most familiar with, the c3 ratio is close to 90 %, one of the highest figures in the eu. ) fourth, european banks dramatically increased their leverage before the crisis. for example, as documented by the esrb, in the late 1990 ’ s the median equity to assets ratio of the largest 20 listed banks in the eu was around 6 %. by 2008, this median level was only just over 3 %. because of the deficiencies of the basel ii capital rules, banks were able to halve their equity ratios without any increase in their risk - weighted regulatory capital requirements. the increases in bank sizes and bank lending have not been matched by an equivalent increase in market - based funding. for example, the ratios of stock market capitalisation to bank credit have decreased considerably in the 2000s in the biggest eu countries, much more so than in the us. as a result, the european financial structure has become even more bank - based than before. the large reliance of european firms – especially the smes – on bank finance has

the objectives of the commission´s proposal are similar to ours. however, the commission´s proposal leaves more discretion to the authorities concerning the separation process. in addition, the commission´s proposal includes an outright ban on organised proprietary trading as in the volcker reform. i welcome the commission´s proposal and i am pleased that the council working group has been negotiating of the proposal throughout the summer. of course, more progress will be made in the autumn, when the new commission and parliament start their work. bis central bankers ’ speeches concluding remarks banks play an important role in the economy as the key financiers of households and companies, among other tasks. banks´ role is especially important in europe, as they are by far the most important source of finance for small and medium - sized enterprises. one of the principal aims of the ongoing regulatory reforms and other policy actions is to enhance the ability of the financial sector to provide loans and other financial services efficiently and without compromising financial stability. being successful in these aims would improve the long - term growth prospects of the european economy and thus the welfare of european citizens. banks´ reputation and the public confidence towards banks have suffered badly since the financial crisis. that has harmed not only banks but also the wider economy. we must rebuild the confidence on financial institutions and financial markets. the regulatory reforms advance that aim. i strongly believe that the ongoing reforms will benefit us all – the citizens, the wider economy, but also the financial institutions. bis central bankers ’ speeches