capital positions were evaluated under a hypothetical stress scenario that involved a deep recession in the united states ( with unemployment reaching 13 percent ) and a notable decline in activity abroad, combined with sharp decreases in both domestic and global asset prices. this exercise was designed to capture both the direct and indirect exposures and vulnerabilities of u. s. financial institutions to the economic and financial stresses that might arise from a severe crisis in europe. the results show that a significant majority of the largest u. s. banks would continue to meet supervisory expectations for capital adequacy despite large projected losses in an extremely adverse hypothetical scenario. conclusion the recent reduction in financial stresses in europe is a welcome development for the united states, given the important trade and financial linkages connecting our economies. however, europe ’ s financial and economic situation remains difficult, and it is critical that the european leaders follow through on their policy commitments to ensure a lasting stabilization. i believe that our european counterparts understand the challenges and risks they face and are committed to take the necessary steps to address those issues. for our part, the federal reserve will continue to monitor the situation closely, work with our financial institutions and foreign counterparts to enhance the resilience of our financial see board of governors of the federal reserve system ( 2012 ), “ federal reserve announces summary results of latest round of bank stress tests, ” press release, march 13. bis central bankers ’ speeches system, and be ready to use our tools to help stabilize u. s. markets should the situation require such action. thank you. i would be pleased to respond to your questions. bis central bankers ’ speeches

reserve requirements, have allowed european banks to lock in funding for up to three years, thereby alleviating concerns about their near - term prospects. with the benefit of this support, european banks in turn have increased their holdings of sovereign debt, contributing to lower borrowing costs for some countries. second, euro - area leaders, the greek government, and private - sector holders of greek debt are taking steps to put greece on a more sustainable fiscal path. its sovereign debt has been significantly reduced, the greek authorities are intensifying their efforts to implement fiscal and structural reforms, and the european union and international monetary fund have pledged a considerable amount of new funds as part of a second assistance package. the greek economy remains in a deep recession, however. third and finally, leaders of most of the members of the european union have approved a new fiscal compact treaty that strengthens fiscal rules and their enforcement. this treaty represents a positive step toward resolving the fundamental tension inherent in having a bis central bankers ’ speeches monetary union without a fiscal union, and thus should help bolster the viability of the euro - area economy in the longer term. although progress has been made, more needs to be done. full resolution of the crisis will require a further strengthening of the european banking system ; a significant expansion of financial backstops, or “ firewalls, ” to guard against contagion in sovereign debt markets ; and, critically, continued efforts to increase economic growth and competitiveness and to reduce external imbalances in the troubled countries. actions taken by the federal reserve the federal reserve has followed developments in europe closely, and we are in frequent contact with key european policymakers. we are particularly focused on protecting u. s. financial institutions, businesses, and consumers from adverse financial and economic developments in europe. to help calm dollar funding markets and support the flow of credit to u. s. households and businesses, the federal reserve acted in concert with major foreign central banks to enhance the u. s. dollar swap facilities that were originally put in place during the global financial crisis and reestablished in may 2010. use of the reestablished lines was limited until late last year. however, in late november, the federal reserve agreed with the ecb and the central banks of canada, japan, switzerland, and the united kingdom to extend the swap lines through february 2013 and to reduce their pricing, from a spread of 100 basis points over the overnight index swap rate to 50 basis points. 1 the lower cost to the ecb