hopefully be ready to join the european union some time from now, although a number of further reforms still need to be implemented. this is especially true for financial markets and the banking sector. there have been many political statements on the most likely year for accession. it is of course, for the politicians to decide on this. in my view, the countries of central and eastern europe should be given enough time to prepare themselves properly for becoming part of the single market. moreover, given the substantial differences among them, the candidate member states should be looked at on a case - by - case basis. some transitional provisions are likely to be necessary for new member states after joining the european union. without such provisions the expansion of the european union may need to be postponed for many years, which is clearly undesirable. moreover, in the past such provisions have also been applied to new entrants, including spain, portugal and greece. it is essential to strike a proper balance. the acquis, the body of legislation which applies to all eu member states, must remain the common denominator. member states can decide to work more closely in some areas, but they cannot detract from the acquis. member states must satisfy certain requirements in the monetary and financial sphere, even those member states that have a derogation with respect to monetary union. these requirements are essential for the functioning of the single market. transitional provisions may be required. however, permanent exemptions or lengthy transitional periods would be inappropriate as they could threaten the internal cohesion of the union. monetary relations let me be a bit more specific about monetary relations and let me start with the period before membership. in the run - up to the accession to european union, prospective member states should take a pragmatic approach to the implementation of monetary policy. it seems only logical that the exchange rate against the euro will gradually be assigned an increasing importance in the monetary policy considerations of candidate member states. an implicit or explicit orientation of monetary policy towards the exchange rate against the euro can also be justified by the relative importance of trade relations between the two regions. some 50 – 60 % of foreign trade of the countries of central and eastern europe is with the european union. where pragmatism is called for, it does not make sense to establish all kind of institutional bells and whistles in the monetary field. rather than participating in any formal exchange rate mechanism with the euro before eu membership, countries in central and eastern europe should focus

- backs and bonuses. retaining a greater proportion of earnings during a downturn will help ensure that capital remains available to support the bank ’ s ongoing business operations during the period of stress. in addition, the committee recently issued a proposal for a countercyclical buffer. this would be imposed when, in the view of national authorities, excess aggregate credit growth is judged to be associated with a build - up of system - wide risk. the countercyclical buffer would extend the conservation buffer range during such periods of excess credit growth. conversely, the buffer would be released when, in the judgement of the authorities, the released capital would help absorb losses in the banking system that pose a risk to financial stability. this would help reduce the risk that available credit is constrained by regulatory capital requirements. taken together, this framework of buffers will increase banking sector resilience and mitigate procyclicality. iii. a new liquidity framework the reform measures i just described will radically transform the regulatory capital framework. in a similar way, the committee has introduced a liquidity framework which is even more far - reaching since a global standard does not currently exist. for the first time, banking supervisors around the world will have a common international standard which they can apply to their banks. the liquidity phase of the crisis was characterised by the speed with which funding dried up and the extended period of time during which banks suffered from that shortage of liquidity. in response the committee proposed global minimum liquidity standards that include measures to promote both the short - term resilience of banks to potential liquidity disruptions and longer - term structural liquidity mismatches. the liquidity coverage ratio – the lcr – will require banks to have sufficient high - quality liquid assets to withstand a stressed funding scenario that is specified by supervisors. this is complemented by the net stable funding ratio – the nsfr – which is a longer - term structural ratio designed to address liquidity mismatches. it covers the entire balance sheet and provides incentives for banks to use stable sources of funding. introducing a new set of standards is a complex process. unlike the capital framework, for which there is extensive experience and data that help inform calibration, there is no similar track record for liquidity standards. the committee is therefore taking a carefully considered approach to refine the design and calibration and we will review the impact of these changes to ensure that they deliver a rigorous overall liquidity standard. but let me be