of the first review of the 3rd mou, if possible yesterday! then this could pave the way for the following benign steps, a sort of roadmap : • reinstatement of the waiver : that will release at least €5 billion from the current ela programme ( at 1. 5 % interest rate ) to be channelled towards standard monetary policy operations ( mro ) with zero interest charge, contributing to greek banks ’ profitability. • debt relief negotiations from either of the two options on the table : the esm plan or the imf plan. • the country then will be getting the “ certificate ” of the dsa, which will open the door to credit rating upgrades for greek sovereign bonds, bringing closer the date of greece ’ s inclusion into the ecb ’ s qe programme which will help towards a lowering of spreads for ggbs and the gradual return to international capital markets. secondly, an equal focus should be given to short - and medium - term growth prospects of the economy because there is evidence that by now recession in greece has the characteristics of hysteresis, namely a persistent and long - lasting recession ( and this is the long - run downside risk for the greek economy ). let me explain. the initial, non - permanent ( cyclical ) effects of the recession have shifted into permanent, structural problems ( lack of new physical capital due to disinvestment, depreciation of human capital due to both the skills deterioration of the longterm unemployed and the brain drain ). to give you only one figure : in 2007, investment was 27 % of gdp, whereas last year it was 12 % of gdp, the lowest level since 1960. so very few would disagree that right now the country needs an investment shock within a new growth paradigm centred around the expansion of its export - oriented output base, aiming at internationally tradable goods and services with high value added. bis central bankers ’ speeches

of failure, such an intervention would bring a huge burden on the public purse. we are fortunate that our large financial institutions are all in a healthy financial condition and well managed, with a very low probability of failure. however, this is also the best time to prepare for the unlikely event of failure. 2 lessons from the financial crisis for resolution the global financial crisis as well as the way in which both governments and central banks had to act to contain the effects thereof has taught us important lessons. the list of lessons is extensive, but i will highlight a few that have a particular bearing on resolution and on what we are attempting to achieve with a strengthened resolution framework. china, france, germany, japan, united kingdom and united states ( data from the international monetary fund and the world bank ) all amounts quoted from the june 2015 quarterly bulletin bis central bankers ’ speeches i. implicit support leads to moral hazard. if banks believe that they will not be allowed to fail ( i. e. that they will be ‘ bailed out ’ ), they tend to take greater risk. similarly, if bank managers and executives are rewarded on the basis of profitability without facing the consequences of excessive risk - taking, it creates skewed incentives. this did not happen in south africa on any large scale, which helped to protect us from the worst of the crisis, but it certainly happened in other parts of the world, with devastating effects. ii. implicit support leads to a mispricing of risk. if investors believe that banks will be bailed out and will therefore not be liquidated, they basically believe that their investment risk profile is similar to that of the sovereign. an effective resolution framework should promote market discipline by ensuring that investors and creditors price for the risk of the institution in which they invest, without relying on a government bailout and hence an implicit subsidy. iii. markets overreact in a crisis. an effective resolution framework should enable authorities to prevent excessive losses that arise from fire sales, frozen markets, excessive volatility, additional collateral requirements, margin calls and early termination rights. iv. early intervention and corrective action reduce the losses resulting from failure. the cost of a failure can be significantly reduced if authorities have the power and the tools to intervene while the financial institution is still solvent. once the market loses confidence in the ability of an institution to recover, its failure becomes a self - fulfilling prophecy. iv. planning and preparing for resolution is important. although the reason for a possible failure cannot