##italisation, which i touched upon at the start of my speech, also marks a step into uncharted territory for european supervisors. this is enshrined in the new european bank recovery and resolution directive ( brrd ) as an exceptional measure that enables an institution to receive an injection of public funds without - as is generally envisaged being deemed “ failing or likely to fail ”. precautionary recapitalisation is only approved under certain conditions. in particular, the institution must be deemed solvent, and the public funds may not be used to offset existing or anticipated losses. supervisors need to carefully examine whether these requirements are met. additionally, the european commission has to decide whether the granting of public funds is compatible with eu state aid rules. it ’ s a particularly sensitive issue because one of the fundamental objectives of the new resolution rules is to shield taxpayers : it should be a bank ’ s shareholders and creditors who are on the hook for unsatisfactory bank management and any losses that arise as a result, not taxpayers. then again, european legislators have accepted a serious disturbance in the economy of a member state and risks to financial stability as grounds for government intervention to prop up solvent institutions. the stringent criteria outlined in the legislation do actually need to be fulfilled, however. in other words, these conflicting aims make it clear that precautionary recapitalisation cannot be a blueprint for averting bank crises. consequently, precautionary recapitalisation is defined in the brrd as a purely exceptional measure. this is also my clear understanding of the term. what is also clear is that, in each and every instance, shareholders and subordinated creditors need to be bailed in before the government coffers are opened. with regard to italy ’ s monte dei paschi di siena, what this means in concrete terms is that the institution ’ s capital base was first bolstered by €4. 5 billion by converting subordinated debt instruments into equity, with the italian government then injecting an additional €3. 9 billion. however, the government will offer compensation to retail investors, thereby increasing its stake in the bank. the ownership structure will change as a result of the aid provided : legacy shareholders will lose out as their stakes are diluted. by contrast, the italian government will own up to 70 % of the institution. to sum up, the state is providing assistance to an ailing bank and, as an investor, will be exposed

dish. to turn out a tasty dish, we need to use the ingredients, in the right quantity and quality, prepare and temper those ingredients properly, mix them appropriately, and cook them at the right temperature according to the required method. it is only then that the dish will be tasty, attractive and wholesome. what then is our next challenge? in my view, the special ingredients that i have so far spoken of, as well as the other elements that are needed to develop a good economy, namely, basic common sense, good timing, sound policy mix, sensible political considerations, continuous well - being of the people, would all need to be generously used as flavours in the preparation of the final dish of growth and stability. we would also need to maintain the balance of all the ingredients at the right “ temperature ” if the outcome is to be right. after all, a dish, if it is overdone or half done, is not going to be edible. in the same way, if economic planners do not judiciously give consideration to developing and matching the right mix of policies which work, and being sensitive to the timing and sequence of the flow of the policy implementation, the growth and stability of the economy would not be attainable. mr. chairman, my dear friends, over the past 7 years, i believe we have been able to deal with many challenges from within and outside, and that is why we have been able to deliver stability and growth to our economy. nevertheless, we must all remember that yesterday ’ s tasty meal will not necessarily mean that tomorrow ’ s meal will also be tasty. tomorrow is another fresh challenge with different considerations, and circumstances. if we are able to assess these conditions cleverly, and develop our plans properly, ( and i believe we are well positioned to do so ), sri lanka would truly be on course to deliver growth and stability on a sustained basis to our people and our economy. bis central bankers ’ speeches mr. chairman, permit me to conclude by making the simple remark that there is no path to success or prosperity, other than via careful planning and hard work. sri lanka has so far progressed with promise, because we have “ walked the talk ”. many of the goals that we set in the past and the major projects that we set our sights upon, have been realized, or are taking shape before our very own eyes, because of dedicated and committed actions. let ’ s be encouraged and inspired by