- weighted capital adequacy framework as a whole pretty much evaporated. we have taken steps, through the new international capital standard, “ basel 3 ”, to address the main failings in the risk - weighted framework. we have tightened up on the required quality of regulatory capital. the “ hybrid ” debt instruments that proved not to be loss - absorbing no longer count as tier 1 capital. efforts have been made to ensure losses are recognised at an earlier point. material deferred tax assets are now deducted from the regulatory definition of capital. the minimum amount of common equity capital banks are now required to hold has been increased to 4. 5 % of their risk - weighted assets. and we have put in capital buffers. it is often too late to take recovery action when a firm drops below minimum standards. and because firms approaching the minimum often have to deleverage sharply which can have a very adverse impact on the real economy. so we have created incentives for firms to run with a substantial buffer of capital above the hard minimum. where common equity capital is less than 7 % of risk - weighted assets, firms now face restrictions on bonuses and dividends. for systemically important banks, the required buffers are higher still. these buffers should give banks more room to use their capital to absorb losses rather than hitting the brakes on lending. on the other side of the equation, some action has been taken to tighten up the calculation of firms ’ risk - weighted assets. and work is also underway to examine whether we can improve the “ standardised approach ” to risk - weighting – an approach in which banks use a riskweight prescribed by the regulators. as a result, the amount of capital in the system has increased substantially. globally, the large banks now hold some $ 500bn of additional equity capital. major uk banks have raised their equity capital by £150bn. their leverage has broadly halved. on average, the major uk banks are now running with an end - point basel 3 common equity capital ratio of 10 %. roughly speaking, that is more than double the equivalent pre - crisis ratio. however, while the risk - weighted approach has been through wholesale reform, it still depends on mathematical models – and for the largest firms, their own models to determine bis central bankers ’ speeches riskiness. so the risk - weighted approach is itself subject to what in the trade is called “ model risk ”. this may sound like some arcane technical curiosity. it is

since 1980, the average number of working hours per person employed in the euro area has been around 12 % lower than in the u. s. the difference has gradually increased and latest estimates suggest that average working hours in the euro area is currently some 15 % below u. s. levels. the lower level vis - a - vis the u. s. is partly explained by fewer actual working days per year, while the widening of the gap reflects the shortening of statutory full - time working weeks and the rising share of part - time employment. in the u. s. these latter determinants have remained broadly stable. an important question which has featured prominently in the policy discussion is whether lower labour utilisation in the euro area reflects predominantly preferences or disincentives from tax and social contribution systems. in this respect, some data show that part - time employment in both the euro area and the u. s. seems to be partly of a voluntary nature and, per se, might thus reflect individual or cultural preferences. however, having said this, it should also be borne in mind that households are influenced by their institutional environment. this includes for example taxes, social security and pension systems. such factors are providing disincentives to work. let me now continue with more recent developments. while the gap in per capita gdp growth vis - a - vis the u. s. has remained unchanged, the underlying explanation has changed. labour productivity has evolved more favourably in the u. s., whilst labour utilisation has developed more favourably in europe. on the latter, i hope and believe that these developments will continue, as the potential for catching up in this regard is very substantial. both participation rates and average hours worked are low in the euro area and unemployment rates are high. 1 / 4 why has there been a reversal of the catching up process of labour productivity growth vis - a - vis the u. s. since the mid - 1990s? the answer is partly found in the usage of information and communication technologies, which has had a beneficial effect on labour productivity in the u. s. a word of warning may be appropriate here as these kinds of comparisons are unfortunately surrounded with uncertainties due to different statistical practices and statistical measurement problems. nevertheless, when analysed by sector, it is impressive to see that, on top of the sectors that manufacture these technologies, it is the very rapid improvement in the service sectors that are using them – such as wholesale trade, retail