a year, instead of annually. 4. improving the regulatory framework the fourth pillar of our financial stability strategy concerns the regulatory framework. in this regard, i should mention three pieces of legislation, which have either been approved, or are at the final stages of adoption. bis central bankers ’ speeches the framework law for bank access to public capital was amended by law no 4 / 2012 of 11 january. the aim is to ensure that injections of public capital into banks will be temporary and subject to strict conditions, to protect taxpayers ’ money and to minimise distortions in competition. an important point to make is that, as long as banks abide by their commitments, private management is preserved through the limited voting rights allocated to shares acquired by the state. a new framework for early intervention, resolution and deposit insurance is at the final stages of adoption, reinforcing banco de portugal ’ s powers in situations of financial distress. the idea is to provide for two different categories of supervisory intervention into credit institutions : corrective early intervention and resolution. the type of intervention will depend on the severity of the problem, which will also determine the tools that banco de portugal may use. the insolvency law is also being amended with a view to facilitating the early rescue of viable firms. the new draft law was submitted to parliament at the end of december and should be approved soon. in addition to the three new pieces of legislation that i just alluded to, banco de portugal has also worked on promoting more robust internal governance arrangements in credit institutions, namely by issuing regulations on internal controls and, more specifically, on the remuneration and compensation policies. the aim is to align the internal incentives within credit institutions and to enhance the resilience of their control mechanisms, in order to prevent excessive risk - taking. iii. the portuguese banking system : recent developments and prospects having described the main elements of our strategy to secure financial stability, let me now take a few minutes to comment briefly upon how the banking sector is performing in the new context. in a nutshell, the main message is that portuguese banks have been strengthening their capital base and reducing their funding imbalances in spite of extremely adverse external conditions and declining profitability. i mentioned a while ago that the banking sector has shown impressive resilience throughout the international financial crisis. indeed, the core tier 1 ratio – the ratio of a bank ’ s higher quality capital to its risk - weighted assets – increased steadily from 6. 8 % at the end of

4 the most recent impetus to deepen the capital markets union is in line with greater integration of the european financial markets5, which brings new challenges and opportunities where promoting sustainable finance gains prominence. attracting savings and financing through the capital markets, as an alternative to the traditional banking sector, will bring about an increase in shared private risk on a cross - border basis, simultaneously creating competitive pressures that will reveal an excess of installed capacity, generating movements towards consolidation as a response to the need for greater scale and efficiency. in sixth place, banks, just like any other incumbent financial institutions, will face competition from new entities based on digital transactional platforms and models that will challenge them from a technological and market share point of view. this has made the need for investment and absorption of new technologies more urgent in terms of both the processes and the relationship with the market ( so - called digital banking ). in this context, the banking system needs to adopt a proactive stance, assessing the competitiveness and viability of its business model ( s ) in a timely way, in view of the different segments and products. in seventh place, an approach is needed that assimilates and anticipates, whenever possible, the regulatory dynamic making the observance of the supervisory rules – compliance with capital 2 / 4 bis central bankers'speeches and liquidity ratios, stress tests etc. – a competitive advantage generating confidence in the market. in eighth place, it is essential to ensure the confidence of the capital markets and the public in general. such confidence is dependent on the elimination of uncertainties as to the nature and valorisation of assets as well as business models and strategies, moving from an approach of limited transparency to one of transparency adjusted to the information requirements, in terms of content and form, for each stakeholder. allow me to elaborate on this latter aspect. regarding institutions ’ governance, to avoid the materialisation of events that may jeopardise their financial soundness, it must be ensured that the four lines of defence are fully operational and focused on the sustainability of the institution and the safeguard of public confidence in its activity. thus, the board of directors is responsible for ensuring sound and prudent management as well as anticipating and adapting the business model based on developments in the business environment. namely, it is responsible for interpreting shareholders ’ appetite for risk, both in terms of capital requirements and risk taking and acting with diligence, neutrality and conscientious respect for the interests of the depositors