reluctant ( as indicated in my january 2011 speech ) to endorse further accumulation of indebtedness of the state in order to recapitalise the banks to insulate the financial system and the economy against tail risks. even if external insurance was not available, direct injection of the capital from external sources would have been a much better solution. however ( as has been seen again with the case of spain ) this was simply not on offer, limiting the possibility for decoupling the pressures of the banking system from those of the sovereign. global upward pressures have increased the amount of capital banks are expected to maintain as both market participants and regulators reassess the uncertainty and volatility surrounding bank asset valuations. and it ’ s not just a question of ratios : upgraded regulatory requirements will soon disallow some elements of what used to be counted as capital, placing further upward pressure. for ireland, the agreement with the troika requires irish guaranteed banks to hold sufficient capital not only to meet the crd ( international regulatory requirements ), but to have enough to absorb prospective losses over the period 2012 – 2014, based on the independent calculations of blackrock solutions, and the cost of selling - off non - core assets sufficient to bring the loan - to - deposit ratios of the banks back into a plausible range ( not more than 122½ % ), and to maintain the higher threshold of 10½ % capital ( even excluding elements of capital that are not regarded as “ core tier 1 ” ) in the base case scenario. this is what determined the additional capital requirements announced in march 2012. our assessment of the capital needs of the banks will evolve over the coming years. as i stressed here eighteen months ago, loan - loss projections following a big bust involve an irreducibly large element of uncertainty. at the central bank, we continue to research the determinants of loan losses. economic conditions ( including house prices ) facing the borrowing firms and households are not the only determinants. as we have been stressing in other fora, the effectiveness of the banks ’ engagement with their stressed borrowers, as well as the legislative and administrative framework for dealing with insolvency ( details of which are being announced by the government today ) are important factors. it should not be thought a paradox that a more engaged and holistic approach by banks, and a less rigid and costly insolvency framework can help reduce loan losses over time. meanwhile, given the final view of

eu. we need to incentivise european savers to want to invest in europe. not because we are european, but because europe should be an attractive market for all investors. i will come back to this a little later in terms of the steps needed to progress this. 2 / 7 bis - central bankers'speeches in addition, more must be done on improving eu competitiveness and to more fully integrate the single market. competitiveness will be a defining feature of the next european commission's agenda. the much anticipated draghi report will be an important contribution to this debate, but as the author has indicated already,'radical change'is needed for the eu to remain competitive. 6 this will be critical if europe is to respond to effectively to the challenges and opportunities presented by the green and digital transitions. as i have mentioned, innovative technology and digitalisation will also bring challenges. existing firms will face increased competition from challenger firms, you will need to innovate quickly and also invest heavily in order to meet increased expectations from your consumers. equally, regulators will need to be attuned so they can respond quickly to anticipate as well as to support innovation so that the benefits can be harnessed in a proportionate and risk - cognisant manner. with this in mind, it is evident the objectives of the funds sector, of public policy makers, and of europe, are intrinsically aligned when it comes to meeting the aims of capital markets union ( cmu ). the latest contribution to the debate on capital markets union was published yesterday by the european securities and markets authority ( esma ). 7 esma's statement outlines 20 recommendations aimed at a range of actors – eu institutions, member states and market practitioners alike. for eu citizens, the recommendations are designed to support the availability of simple, cost - efficient, investment options which are crucial for empowering citizens to invest their savings in capital markets that serve their long - term needs. key recommendations in this area include the development of basic long - term investment products and pension systems that are suitably incentivised and contribute to the development of capital markets. for eu companies, esma believes diverse and sustainable financing options are critical for fuelling growth and innovation in the eu, especially for smes. key recommendations in this area include developing a conducive ecosystem for public companies, and fostering pan - european markets while addressing barriers to integration, particularly for market infrastructures. for eu regulation and supervision, the