repair banks ’ condition by identifying and having the necessary corrective actions implemented where necessary. finally, the comprehensive assessment builds confidence by assuring all relevant stakeholders that banks are fundamentally sound and trustworthy. the ecb will conduct the comprehensive assessment in close cooperation with national authorities, and also with esrb and eba. the ecb will detail the design and strategy of the assessment exercise, monitor its execution, perform quality assurance as well as collect and consolidate the results and finalise and disclose the overall assessment. national supervisors execute the exercise at the national level, benefitting from local knowledge, but following common data requirements and methodology. as an example of the extensive methodology, the asset quality review phase 2 manual was published in march. the manual provides specific guidelines for all involved parties on the conduct of relevant steps of the exercise. the comprehensive assessment is indeed comprehensive. first we do a risk assessment addressing key risks in the banks ’ balance sheets, including liquidity, leverage and funding. after that an asset quality review is carried out examining banks ’ balance sheets based on information at the end of 2013. and finally, a stress test, done in collaboration with the eba, complements the asset quality review by providing a forward - looking view of banks ’ riskabsorption capacity under stress. the asset quality review has progressed and some details of its coverage have been released. approximately 135 000 loan books will be examined by the authorities. the loan file review covers both corporate and retail portfolios. it covers total banking book riskweighted assets ( rwa ) of approximately € 3. 7 trillion, representing 58 % of total credit riskweighted assets across the banks subject to the assessment. in addition, 29 banks with material trading book exposures are subject to a specifically tailored aqr of the trading book. the structure of the comprehensive assessment also clarifies the frequently asked question, how this assessment differs from previously conducted eu level stress tests? the key differences to my mind are as follows : • banks ’ risks and asset quality are assessed in a comprehensive manner at the banking union level. assessments are made applying common definitions, abolishing – or at least showing explicitly – any diverging national interpretations. • sufficient corrective measures can be guaranteed as the ecb in its supervisory role will have all the necessary supervisory powers. bis central bankers ’ speeches • quality of assessments is ensured not only by the ecb ’ s strict procedure for ongoing quality assurance, but also by the involvement of third party evalu

expected to provide over time. for stock prices, for example, this is the present discounted value of dividends ; for real estate, it is the discounted value of the rents or services that are expected to accrue to the owner over time. in theory, the existence of bubbles, defined in this way, is possible in standard asset - pricing models and may even be consistent with rational, profit - maximizing behavior. 6 ascertaining the existence of bubbles in practice is a very different matter. an immediate difficulty is that the theoretical notion of the fundamental price does not have an easily measured empirical in this comparison, i use the nasdaq composite index as a proxy for the high - tech sector and the dow jones industrials index as a proxy for the nontech sector. see john h. cochrane ( 2001 ), asset pricing ( princeton : princeton university press ), p. 402. such a bubble would be called a “ rational bubble. ” it is also conceivable that bubbles are present because some investors are not pricing assets rationally ; for an introduction to that notion, see annette vissing - jorgensen ( 2004 ), “ perspectives on behavioral finance : does ‘ irrationality ’ disappear with wealth? evidence from expectations and actions, ” in mark gertler and kenneth rogoff, eds., nber macroeconomics annual 2003 ( cambridge, mass. : mit press ), pp. 139 - 94. see, for example, jean tirole ( 1985 ), “ asset bubbles and overlapping generations, ” econometrica, vol. 53 ( november ), pp. 1499 - 528 ; and dilip abreu and markus k. brunnermeier ( 2003 ), “ bubbles and crashes, ” econometrica, vol. 71 ( january ), pp. 173 - 204. counterpart. in part as a result of this measurement problem, statistical tests using historical data cannot easily distinguish bubbles from failures of the standard asset - pricing model in some other dimensions, or no failure of the model at all. indeed, for every study of historical data that finds evidence of a bubble, often another shows that the findings could be explained by an alternative specification of the fundamentals in the absence of bubbles. 7 that is, even with the benefit of hindsight, statistical tests attempting to confirm the existence of bubbles in historical episodes can remain inconclusive. of greater relevance for policy discussions, however, is not