upwards over recent months. this is a matter of concern. today ’ s increase in ecb interest rates is a decisive step to address these upside risks to price stability and it will contribute to the continuation of non - inflationary growth in the euro area. allow me to give you a more detailed overview of the main elements of our assessment of monetary, financial market and other economic developments. let me start by addressing the latest monetary developments in the euro area. the three - month average of the annual growth rates of m3, covering the period from february to april 2000, was 6. 3 %, ie significantly above the reference value of 4½ %. thus, the most recent m3 data confirm that the liquidity situation in the euro area continues to be very generous. m3 growth deviated from the reference value in 1999 and growth rates increased further in early 2000. this picture of very generous liquidity conditions in the euro area is complemented by the rapid expansion of credit to the private sector, which remained close to or above 10 % throughout 1999 and exceeded 11 % in april 2000. taken together, such developments would clearly point to upside risks to price stability over the medium term, if not counteracted in time. turning to the second pillar, we have to consider economic and financial market developments as well as consumer price developments. looking at economic developments, the outlook for growth in the euro area has improved markedly over the past few months. overall, indicators for economic activity released since the end of last year point to continued strong growth, following the upturn in real gdp growth in the second half of 1999. all the forecasts currently available from major international organisations and private institutions now project real gdp growth to be above 3 % this year and next year, which is significantly higher than expected at the end of last year. this positive outlook reflects favourable domestic and external conditions for growth. on the domestic side, expansion of private consumption and investment should benefit, in particular, from ongoing employment growth and higher rates of capacity utilisation. domestic demand is also supported by high business and consumer confidence. on the external side, the upturn of growth in the world economy appears to be stronger, faster and more broadly based than was expected at the end of last year. hence, euro area exports should remain strong. financial market developments also support the view that the economic expansion in the euro area is set to continue at a fast pace. moreover, the exchange rate of the euro appreciated at the end of may and in

ssm in more detail and how i expect it to affect the supervision and practice of banking in europe. there are six points i would like to highlight. first, i expect the ssm to implement the most advanced supervision of banks. this means, of course, using all the modern methods to be forward - looking and risk - based, focusing on the viability of banks ’ business models, the robustness of their balance sheets to shocks and the evolution of their liquidity and funding positions over time. this is the basis on which we are currently designing the single supervisory model which will apply to all banks in the ssm – not only to those that are directly supervised by the ecb. second, the ssm will have to address the problems created by the heterogeneity in the way that banks calculate risk - weighted assets. even though euro area banks have a healthy median core tier 1 capital ratio of above 12 % of risk - weighted assets, investors seem to still have concerns about their robustness due to lack of transparency on how they calibrate their internal risk models, as well as differences in how models are validated across jurisdictions. the ssm should create more homogeneity by imposing common principles about methods and models ’ parameters in order to improve the reliability of banks ’ internal models. the basel committee is also discussing how to address this issue and some countries have see “ the european crisis and the role of the financial system ” speech by vitor constancio, vice - president of the ecb, at the bank of greece conference on “ the crisis in the euro area ” athens, 23 may 2013. http : / / www. ecb. europa. eu / press / key / date / 2013 / html / sp130523 _ 1. en. html. see williamson, j., “ comment ”, in bergsten, f. ( ed ), international adjustment and financing : the lessons of 1985 – 1991, institute for international economics, 1991, p. 243. bis central bankers ’ speeches recently introduced minimum floors to risk weights of some types of assets. the ecb / ssm will ensure that, both within and across countries, the same types of risks are given similar weights. third, the ssm will lead to a harmonised treatment of non - performing exposures and provisioning rules, which at present vary between jurisdictions and are not directly comparable for investors. the european banking authority ( eba ) has recently released technical