european developments, includes an average increase in bond yields of 75 basis points unevenly distributed across countries ( no increase for germany and more than 200 for some more vulnerable countries ), accompanied by an average drop of 10 % in equities. the outcome of the two scenarios indicates a negative impact on banks ’ common equity tier 1 ( cet1 ) capital hovering around 200 basis points in terms of deviation from the baseline scenario. this impact has to be considered against the comfortable present average cet1 ratio of 14 % enjoyed by the euro area banks. it is also important to recall that market sentiment towards euro area banks has continued to improve, despite some gyrations that broadly reflect developments in interest rate expectations ( figure 16, lhs ). while contagion from the recent events of bank resolution and liquidation remained contained, these events have also highlighted the important challenges regarding the resolvability of weak banks. notwithstanding some recent progress in non - performing loan ( npl ) disposals, the large stock of npls remains a key structural concern in several countries. in addition, overcapacity and cost inefficiencies continue to weigh on bank profitability in certain banking markets. 16 / 20 bis central bankers'speeches the economic recovery, the expected steepening of the yield curve and even the progress being made in reducing the npl level from the average peak of 8 % in 2013 to the more recent average of 5. 5 %, have improved the market assessment of future banks ’ profitability. analysts ’ earnings forecasts for 2017 and 2018 have been revised upwards since the u. s. elections, even if net interest income expectations have changed only marginally, despite improving economic conditions ( volume effect ) and ( prospective ) higher long - term interest rates ( price effect ). analysts revised their earnings forecasts between october 2016 and january 2016 ( see figure 16 black dot in left bar ) and between august 2017 and november 2016 ( black dot in right bar ) with the respective contributing factors. while forecasted net interest income was a drag on net income in the first period it contributed positively in the second period. forecasted loan loss provisions contributed positively in the second period because they became less negative over the period november 2016 – august 2017 while forecasted operating expenses increased. macroprudential policy let me now turn to the role of macroprudential policy in this risk environment. the objective of macroprudential policy is to prevent and mitigate systemic risk by strengthening the res

and human trafficking. crime and money laundering is indeed a global problem which requires a concerted global response. in order to protect our respective financial systems from the destabilizing effects of crime and money laundering, it is imperative that we act and respond to this scourge with unprecedented resolve and commitment to combating it. everybody has, therefore, a responsibility to combat money laundering, because its negative impact has a unique way of creating far ranging negative consequences. by tackling money laundering we would be attacking the criminals at their weakest and most vulnerable point - their money sources. in the past years since the start of the criminalization of money laundering and the enforcement of anti money laundering laws in the 1970s and more vigorously in the 1980s and 1990s, evidence from court cases and reported suspect transaction has given an indication that the most common money laundering typologies has been in the realm of drug trafficking, organized crime, corruption, illicit dealing in weapons, human trafficking, fraud and theft. the act of successful money laundering fuels the perpetration of the above crimes by providing the criminals with avenues to conceal their deeds from law enforcement agencies and ultimately provides them with the rewards for their criminality in the form of money which would then appear to be legitimate. the concealment cycle for the proceeds of money laundering involves, firstly, the distancing of the criminals from the illegal proceeds ( money or property ), the obscuring of the money trail, hiding of the origins to eventually posses what would appear as clean money. the role played by globalization and ict in the concealment process in money laundering has been aptly described by the following quote from a central banking thriller “ nest of vipers ” by linda davies : “ the money screamed across the wires, its provenance fading in a maze of electronic transfers which shifted it, hid it, broke it up into manageable wads which would be withdrawn and re - deposited elsewhere, obliterating the trail ”. the linkage between money laundering and crime denotes that everybody as individuals is affected by money laundering. crime erodes basic individual liberties in that it threatens their rights to life and entitlement to property. the consequences of crime and money laundering are bad for business, development, and the general rule of law. governments have therefore got real reasons for spearheading the combating of money laundering. another reason why money laundering should be combated is that if left unchecked, it would lead to the accumulation of economic power to