inconvenient truth : inflation in the united states is below target and has been for some time. beyond sluggish inflation, we ’ re starting to see signs of slower global growth playing out in the u. s. data. while consumer spending is holding up, other parts of the economy — including manufacturing, exports, and business investment — have seen growth stall or experienced outright declines. geopolitical tensions the third and final issue i want to discuss — the rising geopolitical tensions around the globe — further complicates an already complex picture. when it comes to the economic outlook, the word of the day — and probably the year — is “ uncertainty. ” trade negotiations, civil unrest, and tensions in a number of corners of the world are driving many businesses to take a wait - and - see approach to investment, thus putting a further dampener on growth prospects. it ’ s notable that later in the same poem i used to open my speech, john donne writes, “ if a clod be washed away by the sea, europe is the less. ” the ongoing uncertainty around brexit and its eventual outcome is a cause of concern not just for the uk economy, but many of its european trading partners. it ’ s impossible to predict what the spillover effects will be when brexit finally reaches a conclusion. 2 / 4 bis central bankers'speeches we face similar uncertainty on our own shores regarding trade tensions. i frequently hear from my business contacts that they ’ re holding off on making investments until the landscape is clearer. and the ongoing uncertainty in both of these situations, rather than the day to day ups and downs, has become a key driver of business decisions. trade negotiations and brexit are top of mind when it comes to uncertainty. but geopolitical risks and political upheaval are affecting regions across the globe. it ’ s striking that in almost every corner of the world geopolitical tensions are threatening to put the brakes on growth. even if the outcomes of current negotiations are ultimately positive — be they between the u. s. and china, or the uk and the european union ( eu ) — the uncertainty created by current events is no doubt having a lasting effect on the economic conditions we ’ re experiencing today. furthermore, the interconnectedness of our economies means that literally, no man is an island. if one economy starts to struggle, the spillover effects onto others can take hold rapidly. the common thread of geopol

unpleasant surprises? i am too old to exclude that. but don ’ t forget that the banks in the programme countries have already been assessed extensively. from that perspective we should expect only few surprises. however, some portfolios are very complicated and require specific expertise. take for example the shipping sector. then there is the question of how you value non - liquid assets. those are difficult discussions. but we have a european perspective in the asset quality review. the biggest surprise could come from the number of assets that has been classified incorrectly. they will then have to be revalued. will the ecb in case of capital shortfalls wait till the end of the review or try to work out a solution right away? the supervisory role of the ecb sets in only in one year ’ s time. what you see is that banks are already anticipating and cleaning up their balance sheets. how firm will this exercise be compared to the two previous ones by the eba? you refer to the stress test, the third stage of the comprehensive assessment. we are discussing this with the eba. we have already decided what the buffer requirements are for the second stage, the asset quality review. they are pretty tough. banks need to have 4. 5 % in common equity tier one ( cet1 ). we added a capital conversation buffer of 2. 5 %. for significant banks 1 % is added. then we are at 8 %, which is in substance comparable to the old capital definition. bis central bankers ’ speeches