circumstances, the amount outstanding of lending by private banks has been increasing. ii. conduct of monetary policy the bank changed the guideline for money market operations at the monetary policy meeting ( mpm ) in february, raising the uncollateralized overnight call rate target to around 0. 5 percent. this policy adjustment was made in line with the framework for the conduct of monetary policy introduced in march 2006. the bank reviewed the outlook for japan's economy based on data and information on domestic and overseas economies available at the time of the mpm in february. its assessment at that meeting was as follows : the cpi is likely to increase as a trend as the economy continues to expand moderately ; and with the prospects of the economic and price situation improving, the stimulative effect of monetary policy, if the policy interest rate were kept unchanged, could gradually increase, and if the expectation takes hold, in such a situation, that interest rates will remain low for a long time regardless of developments in economic activity and prices, there is a medium - to long - term risk of larger swings and of inefficient allocation of resources as firms and financial institutions over - extend themselves. the bank judged at the mpm in february that it was appropriate to adjust the level of the policy interest rate in order to maintain a desirable course of economic activity and prices. this policy action will still keep the monetary environment very accommodative, and the bank believes that it will contribute to ensuring price stability and achieving sustainable growth in the medium to long term. the bank presented its basic thinking on the future course of monetary policy in the april 2007 outlook for economic activity and prices, along with the outlook for economic activity and prices. in sum, while confirming that japan's economy remains likely to follow a path of sustainable growth under price stability and assessing relevant risk factors, the bank will adjust the level of interest rates gradually in accordance with improvements in the economic and price situation. the bank is determined to conduct monetary policy appropriately in the light of developments in economic activity and prices, and contribute to sustainable economic growth under price stability.

the market across the whole gambit of the banking portfolio. however, financial innovation is more pronounced in mortgage loans, where demand for credit has been particularly strong : mortgage loans continued to grow at over 30 % per annum in the first half of 2006. many banks, many more than in most eu countries, offer mortgage loans “ a la carte ” according to the possibility of repayment by the borrower. initially, interest - only mortgage loans were introduced where the borrower pays, typically for a period up to 1 / 3 of the total duration of the loan, only interest. then, mortgages with an initial grace period, during which no capital payments are made, appeared. later, came mortgage loans with embedded flexibility in repayment, where monthly installments can be increased, reduced or skipped and the duration of the loan can be adjusted. finally, foreign currency mortgage loans are being offered ( initially in yen, recently in swiss franc ), while many banks have securitized a significant part of their mortgage loans. the increasing wealth of the upper income categories has also led to the establishment of private banking departments which offer very sophisticated structured products to their wealthy clients. the greek banking system is in good health, and this was verified by the detailed examination it underwent during the financial sector assessment program which we undertook last year under the auspices of the international monetary fund. in the context of this exercise, a stress test was conducted which showed that in general the greek banking system can withstand various adverse economic situations contemplated by the scenarios. even in the worst case scenario, where it was assumed that the probability of default increased by 60 %, the resulting fall in the capital adequacy ratio ( car ) was just over 1 percentage point. as the overall car is around 13 %, even a 1 percentage point reduction, or slightly more, leaves it at quite satisfactory levels. profitability in the greek banking sector is above eu averages, something which is partly explained by cyclical factors ( in 2005 the return on equity in greece was 17 % compared to 12 % for medium sized banks in the eu ). the non - performing loans ratio ( npls ), although still higher than european averages, has declined to 6. 3 % in 2005 from 7. 1 % in 2004 due to increased write - offs. we have to note that this relatively high ratio is partly accounted for by a couple of medium sized banks, which are, however, in the process of cleaning up their bad loan portfolio. the