run ”, would most likely provide more resilience in a crisis than integration through interbank lending and fixed income investment. new research shows that the vulnerability of the euro area to a “ sudden stop ” worsened the crisis by further constraining the fiscal reaction of governments during the downturn. 14 while such options to increase equity funding are being developed, a strategy that can improve debt dynamics for all firms ’ is to raise “ implied equity ” – the outlook for future income. if firms expect higher income, it improves their debt - to - income ratios and debt service capacity, which in turn creates space for new investment. 15 in this sense, raising both the level and trend of potential growth is an integral part of recapitalising european firms, and indeed of the economy as whole. for more information see article on “ deleveraging patterns in the euro area corporate sector ”, ecb monthly bulletin, february 2014. see opinion piece by benoit cœure and jorg asmussen, “ a three - pillar - strategy for the euro ”, published in berliner zeitung and les echos, 19 september 2014. martin, philippe and thomas philippon ( 2014 ), “ inspecting the mechanism : leverage and the great recession in the eurozone ”, forthcoming. the concept of “ implied equity ” echoes in an investment context what holmstrom and tirole have called “ inside liquidity ”, i. e. future income streams that the private sector can pledge to react to a liquidity shock. raising implied equity has therefore the additional benefit of making the economic system more resilient to shocks, i. e. it has stabilising as well as allocative properties. see holmstrom, bengt and jean tirole ( 2010 ), inside and outside liquidity, mit press. bis central bankers ’ speeches we face however a circular problem in the euro area : we need higher potential growth to work through the debt overhang so that firms can being investing again ; but that investment is itself necessary to raise potential growth. and this circle is potentially vicious : if low potential growth leads to lower investment, then it further lowers potential growth. a policy mix to lift investment demand this is where the next part of a comprehensive approach comes in : getting the policy mix right on the supply side of the economy to lift investment demand. in a basic solow growth model, investment grows at the growth rate of productivity plus the growth rate of hours worked along the steady state path

. when assessing appointees to the board or other key management functions of european banks, we consider their knowledge, skills and experience, as well as their reputation and the time they are able to dedicate to the role. we also take into account any possible conflicts of interest arising from the bank ’ s various activities and clients which could potentially hinder the independence of mind of those occupying key positions. most importantly, suitability must be met at all times. the emergence of new facts that may affect the banks ’ or the ecb ’ s initial assessment of a board member ’ s suitability could lead to a reassessment of the suitability of that member, by either the bank or the ecb. in cases where a board member is deemed no longer suitable, he or she may be removed from their management function, as provided for under eu law. beyond individual suitability, we also have expectations for the board as an ensemble – i. e. whether collectively its members have the right combination of characteristics to adequately manage the bank. between them, board members must have a good range of skills and experience, including, but not limited to, being well - versed in risk management. they must have a clear picture and a good understanding of the risks banks face and be ready and able to mitigate those risks. in addition, banks ’ boards must be diverse – not just in terms of gender, but also in terms of broader diversity, as set out in eu law. [ 4 ] we have engaged with those banks which do not yet have diversity policies or internal targets for gender diversity at board level. as at the end of 2021, a third of the banks under our direct supervision did not meet their internal targets for gender representation at board level. of course, the economic environment and the skills required to navigate the banking business keep evolving. nowadays, a bank ’ s board should be well - versed in climate and environmental risks, as well as it infrastructure and digitalisation strategies. we therefore encourage banks to nominate board members with adequate expertise in these areas. digital banks are increasingly complex structures and cybersecurity has never been more important. however, at the end of 2021, only around a fifth of the euro area ’ s largest banks had sufficient it expertise at board level. increasing this ratio will be key for banks to navigate the digital era successfully. behaviour and culture the elements i have mentioned thus far make up the design and structure of a bank ’ s internal organisation. they