exceeding both public and residential investment. the latter only started to recover in late 2014 and currently stands at around 20 % below its pre - crisis peak. public investment seems to have stabilized at a somewhat lower level with respect to pre - crisis years, after having declined by over 20 % between 2009 and 2016. the distinction between various investment components is important. it is primarily business investment and public investment that is relevant for the long - run productive capacity of an economy. so i ’ ll leave residential investment for the time being, and just focus on business investment and public investment. secondly, the diagnosis of whether investment has been low, also depends on the benchmark used. usual benchmarks include comparisons with past investment growth rates, pre - crisis investment levels, or developments of other macroeconomic variables such as gdp. figure 2 : business investment ratio in the euro area ratio to gdp ; investment and gdp are both in real terms 14, 0 13, 5 13, 0 12, 5 12, 0 11, 5 11, 0 total investment, real ( lhs ) private - sector non - residential investment, real ( rhs ) average ( 2003q1 - 2017q2 ) source : ecb although it is not a priori clear which benchmark to use, in figure 2 we compare the development of business investment to that of gdp. the dark blue line on the right - hand - side shows the ratio of euro area real business investment to real gdp. this has now surpassed the average observed since the early 2000s, represented by the grey line. however, it is still clearly below its pre - crisis peak. the recovery of the real total investment to real gdp ratio, shown by the yellow line on the left - hand - side, has clearly been more protracted. when discussing the dynamics of investment, we also have to consider the measurement issues around investment. the structure of the euro area economy has been shifting towards the services sector. consequently, the nature of investment has been changing, with a notable increase in expenditure on intangibles such as design, patents, branding, and employee - training. this has implications for measuring investment, as intangible assets are only partially included in the official statistics. for example, in last year ’ s winter forecast report, the european commission showed that the inclusion of intangibles not currently classified as investment, would more than double the share of intangible investment in business sector gross value added. so what ’ s the diagnosis based on this

process. a major step forward in the convergence of supervision in europe can be achieved through the lead supervisor model. as you will know, the lead supervisor model was launched by the european financial services roundtable in 2003 / 2004. under this model, the home supervisor is made responsible for supervision of an entire financial firm, including its foreign subsidiaries, while recognizing the need for an important role for the host supervisor. indeed, in my view the lead supervisor model requires a close working relationship between the host and the home supervisors so as to achieve effective supervision. the home supervisor, referred to as the lead supervisor, is given final authority to set the reporting requirements for the entire group, to coordinate the validation of its internal models at the group and local levels, as well as the planning of on - site bank inspection regimes, and to co - ordinate the authorisation process. the concept of lead supervision promotes greater efficiency. moreover, the lead supervisor model also fits in with the continuous integration – or perhaps i should say globalization – of the financial sector. after all, europe is part of the global financial market, and many large financial players, notably also in the netherlands, have expanded far beyond the european frontiers. dnb believes the lead supervisor model can properly support the interests of market participants, which should be carefully weighed when deciding upon the future architecture of financial supervision in europe. an illustration of how the lead supervisor model can work is the preliminary high level agreement between dnb and the united kingdom financial services authority ( fsa ) regarding the supervisory consequences of a possible merger between abn amro and barclays. in this specific case, we have been able to come to good, pragmatic and transparent agreements. it has been agreed that decisions will be taken on a consensus basis where material issues affecting the combined group are concerned. in the unlikely event that the supervisors do not agree, the lead supervisor, the fsa, will have the final power of decision making. addressing the rise of hedge funds a second challenge facing supervisors today is to deal with concerns that unregulated parties such as hedge funds and private equity constitute a potential source of systemic risk. before i discuss these concerns, let me stress that both hedge funds and private equity have enriched the financial system in many ways. hedge funds provide liquidity and price discovery in many markets and have fostered financial innovation, so facilitating the distribution of risk within the financial system. private equity mobilizes risk - bearing capital for investments in companies and generally