series of meetings and discussions among bank of america, the regulatory agencies, and treasury. during these discussions, bank of america's ceo, ken lewis, told us that the company was considering invoking the material adverse event clause in the acquisition contract, known as the mac, in an attempt to rescind its agreement to acquire merrill lynch. in responding to bank of america in these discussions, i expressed concern that invoking the mac would entail significant risks, not only for the financial system as a whole but also for bank of america itself, for three reasons. first, in light of the extreme fragility of the financial system at the time, the uncertainties created by an invocation of the mac might have triggered a broader systemic crisis that could well have destabilized bank of america as well as merrill lynch. second, an attempt to invoke the mac after three months of review, preparation, and public remarks by the management of bank of america about the benefits of the acquisition would cast doubt in the minds of financial market participants – including the investors, creditors, and customers of bank of america – about the due diligence and analysis done by the company, its capability to consummate significant acquisitions, its overall risk - management processes, and the judgment of its management. third, based on our staff analysis of the legal issues, we believed that it was highly unlikely that bank of america would be successful in terminating the contract by invoking the mac. rather, an attempt to invoke the mac would likely involve extended and costly litigation with merrill lynch that, with significant probability, would result in bank of america being required either to pay substantial damages or to acquire a firm whose value would have been greatly reduced or destroyed by a strong negative market reaction to the announcement. for these reasons, i believed that, rather than invoking the mac, bank of america's best option, and the best option for the system, was to work with the federal reserve and the treasury to develop a contingency plan to ensure that the company would remain stable should the completion of the acquisition and the announcement of losses lead to financial stress, particularly a sudden pullback of funding of the type that had been experienced by wachovia, lehman, and other firms. ultimately, on december 30, the bank of america board determined to go forward with the acquisition. the staff of the federal reserve worked diligently with treasury, other regulators, and bank of america to put in place

statement released on 5 may 2014. bis central bankers ’ speeches • the third objective is the reorientation of the production model to ensure rapid and sustainable growth in the long term. the greek economy is not simply emerging from a cyclical recession. at the same time, it is shifting towards a new growth model. thus, economic policy needs to generate conditions that favour supply - side restructuring of the economy. this requires that structural reforms are stepped up to ensure the efficient and competitive functioning of product, labour and capital markets. at the same time, a recovery of investment requires a business environment with a low administrative burden for businesses, an efficient public sector and a stable tax environment that will ultimately facilitate the easing of the tax burden on businesses and individuals. a question that arises is the extent to which this growth model will be viable on the demand side. that is, will a rise in investment and net exports offset the gap in demand resulting from the squeeze on private and public consumption expenditure? given the size of adjustment in the economy, such an outcome is in my view feasible in the long run, even under fairly conservative assumptions regarding the dynamics of exports and investment. banking sector developments let me now turn to issues related to the banking sector. important and promising developments are taking place in the greek banking system. the banking landscape today is very different from that prevailing at the start of the crisis. • core banks ’ capital adequacy ratios have been restored and excess capacity has largely been eliminated. the stress test exercise was well - received in the markets and the market capitalisation of greek banks has been significantly boosted. • funding conditions have improved. as i also mentioned, ela has been eliminated and recourse to central bank financing has fallen sharply since its peak in 2012. additionally, greek banks have regained access to wholesale markets, allowing them to tap market funding. private sector deposits have now stabilised and initially recorded a sharp increase in the wake of the elections in mid - 2012. • pre - provisioning operating profitability is improving. this can be attributed to cost containment, primarily, from the funding side and, secondarily, from the operating side. positive developments are also present on the revenue side with net interest income and fees and commissions recording rises. • the deterioration of asset quality appears to have been slowing down. • finally, consolidation has occurred. fewer but stronger banks are in operation and the first benefits from the exploitation of synergies are already visible. more gains in both cost savings