article on banking points to challenging earnings prospects and the need to fundamentally overhaul business models. the thing that european banks have in common is that they are not having an easy time of it these days. prominently, bank shares have sharply declined over the past year. comparing the euro stoxx 50 and euro stoxx banks indices, bank shares have dropped by over 30 %, while other shares have roughly maintained their market value. in addition, the european financial sector and the european union were subjected to another, 1 / 4 bis central bankers'speeches wholly different and quite unexpected challenge. i am speaking of the british referendum, where a majority of british citizens voted against remaining part of the european union. the british government recently reemphasised its intention to initiate the exit process by the end of march 2017. depending on the subsequent political negotiations, relations between european union and united kingdom may change quite drastically. for instance, financial institutions based in the united kingdom might lose access to the single market. in any case, the referendum has brought the european integration project of an “ ever closer union ” to a standstill. furthermore, europe is faced with a steep rise in the number of refugees as well as growing nationalism in response to ubiquitous sources of insecurity. now it would be ignorant to characterize headwind to the european project as a new phenomenon. but given today ’ s high political uncertainties and disorientation, the european union is prone to being conceived as the problem rather than the solution. 3. whose responsibilities? to sum up, europe has recently proved to be a reliable source of headlines for those in the employ of the international media and the information industry. but for those who need to make sense of information – be they citizens or financial sector employees – the news overload and accompanying waves of changes sometimes serve to make this already complex world even more confusing. it comes as no surprise, then, that disorientation leads to quick accusations and overly hasty appeals to move in new political directions. this is observable in the banking sector, where discontent is being increasingly put at the feet of public authorities. a recurrent move by banks has been to compare past profits one on one with their present outlook. if an unchanged business strategy leads to a poorer outcome or deterioration in prospects, it would make sense to attribute this to the transformed landscape of low interest rates and stronger regulation. it goes without saying that causal interactions exist. for example, it is taken as read that monetary

today, we find ourselves in a strong position to ride out the waves of change. nevertheless, we are fully aware that past success does not guarantee immunity from future challenges. ladies and gentlemen, there is irrational exuberance, just as there is radical uncertainty, with periods of calm in between. this is our present reality and we must constantly work for balance and re - balance, managing the pace and the content of foreseeable change in our own spheres of responsibility. as market stakeholders, we must see change in the factors that reshape the markets and their participants. the core agenda of the bsp and the past 12 years provide a rich canvass from which we can draw some highlights. we shifted to a risk - based supervisory framework so that we can assess the behavior of bank management against standards of safety and soundness ; obviously, mere paper compliance is not acceptable. this behavioral focus was enriched by other complementary reform strands such as the governance standards of the board of directors and bank senior management, the amendment to the compliance framework, as well as several other reforms on risks related to credit, market, operations, and it management. we introduced higher bank capital thresholds so that banks can navigate a more interconnected and sophisticated financial market system. the bsp likewise enhanced its cooperation and coordination efforts. the financial stability committee ( fsc ) was set up with a mandate to conduct effective macro - prudential surveillance of the financial system, detect signs of instability, and coordinate policy responses with other regulatory agencies. with the sovereign elevated to investment grade, the philippines needed to re - position to better manage cross - border commerce. in this connection, we thank congress for its full support of initiatives liberalizing foreign entry into the banking system. this eventually became law, 2 / 3 bis central bankers'speeches specifically ra10574 and ra10641. on the latter, we are happy to report that nine banks have entered the philippine banking industry thus far, with six more banks expressing interest. moreover, to guarantee that our monetary policy actions are better transmitted into market pricing, we introduced the interest rate corridor last year. having market rates better aligned with the bsp policy rate ensures a better transmission of monetary policy into the real economy. this has also set the stage for the progressive roll - back of high reserve requirements as we develop the sophistication of our policy instruments. meanwhile, the emergence of fintech in a market, driven by the needs of millennials is also expediting