the peak levels they reached during the crisis has been significant. private - sector nonperforming loans, which have fallen by 60 % from their peak in 2013, currently stand at the same level as in 2009. foreclosed assets have followed a similar pattern, falling by 40 % from their peak in 2012. the economic recovery has certainly contributed to this process, but it has also been driven by credit institutions ’ management of troubled assets and by supervisory pressure. spain has made relatively more progress than other euro area countries in reducing the volume of non - performing loans built up during the crisis. moreover, economic growth – albeit at lower rates – can be expected to continue to help to gradually reduce them over the next few years. despite these improvements, the level of unproductive assets of spanish banks ( especially those related to business in spain ) remains relatively high and above precrisis levels. 3 / 11 reducing unproductive assets continues to be a challenge for the industry, requiring banks to strengthen the application of active management policies to their impaired assets. in this respect, the agreements to sell troubled asset portfolios announced over the past year will accelerate the reduction of future npl ratios more than initially estimated solely on the basis of the cyclical improvement in the economy and the experience of previous credit cycles. in order to address this challenge, which most other european banks also face, the european economic and supervisory authorities have taken initiatives to accelerate the reduction of npls. in particular, the european commission announced a package of measures in march this year, which included a proposal to review the capital requirement regulations and an npl provisioning schedule. correcting the high level of impaired assets is key for two basic reasons. first, because the balance - sheet clean - up will improve banks ’ profitability and solvency. that is to say, it will free up resources currently devoted to financing unproductive assets and allow them to be used to finance new lending. and second, because correcting the levels of bad debts in the euro area should smooth the path to creation of a pan - european, fully mutualised deposit guarantee scheme with sufficient fiscal backing, since it would enable risks to be shared without problems inherited from before the establishment of the single supervisory and resolution mechanisms. this is the third pillar of the banking union, a key element which seeks, moreover, to reduce the link between banking risk and sovereign risk ( see chart 3 ). restoring profitability restoring profitability is another of the main challenges facing the

comfort with the personal relationship. in summary, president lula and i started from different points of view but brazil brought us close together. on the other hand, within my duties in the administration of a global corporation i was the person with ultimate responsibility for the bank's investments and those of its clients in all countries in which we operated. under these responsibilities, it was required that we track the evolution of the governments and economic policies of some 30 countries around the world. i saw amazing examples of success and of failure. i can assure you that my experience allows me to be confident in what i see from president lula's government. brazil is on the right track. it is important to note, however, that the main focus of an investment policy evaluation rests in the model of the central bank's actions. having been responsible for the areas of capital markets, currency, operations desks, and corporate and sovereign credits, i am confident in concluding that there is a consensus in the world today that the central banks that have been assigned a multiplicity of functions and targets are doomed to fail. successful central banks are those that have price stability as their only mandate. in this regard, i would like to emphasize that competence, seriousness and patriotism are a legacy of arminio fraga's administration at the central bank. there is no doubt that the implementation of a floating exchange rate regime and of the inflation targeting regime in brazil at a critical moment for the brazilian economy in 1999 are a hallmark in the history of central banks in emerging economies. the substantial improvement in transparency and credibility that has taken place over the past three years has been incorporated into the working structure of the brazilian central bank. arminio, thank you for the loyalty and professionalism you showed in the transition process. although there are many instruments a government can use to implement its economic policy, the task assigned to the central bank is to keep the rate of inflation at a low level, mostly because the central bank has only one instrument, which is monetary policy. even with only one goal and with only one instrument, in theory central bank actions can be organized in different ways. for a long time in the past, monetary policy was conducted through the control of monetary aggregates. this practice, however, proved to be increasingly inefficient as economic systems designed new substitutive mechanisms to create money that had not been supplied by the monetary authority. with advances in information technology and its effects on the productive processes