real economy. 5 as recognised by the single supervisory mechanism, “ [ b ] anks can and should exit the market if they are managed in a risky and unsound manner, or if they are structurally incapable of maintaining their competitiveness based on a sound business model. ” 6 in such cases, the authority entrusted with ensuring financial stability should be equipped with the necessary instruments to safeguard confidence and ensure the financing of the economy is not 1 / 4 bis central bankers'speeches disrupted. post - global financial crisis, this has been achieved through the establishment of resolution frameworks whereby the usage of public funds is minimised. new powers and tools have been created and entrusted – in many cases to central banks – to ensure that critical operations of banks can continue and value is preserved while losses are mostly absorbed by shareholders and creditors with the aim of preserving financial stability. new institutions have also been created. the creation of the european systemic risk board ( esrb ), nine years ago, was a milestone in this respect. in sum, first, financial stability is inherent to the mandate of central banks ; second, microprudential supervision is essential but not sufficient to safeguard financial stability. macroprudential supervision is also needed and it should be entrusted to the entities that are better placed to assess systemic risks, i. e., the central banks ; third, in order to conduct macroprudential supervision and succeed in their mandate central banks need adequate instruments ; fourth, financial stability is not about preventing bank failures, it is about safeguarding depositors ’ confidence and preserving the regular financing of the economy. adequate resolution and liquidation frameworks, including access to public funds, are thus an indispensable part of the crisis management toolkit. it should also be noted that the low interest rate environment of recent years may require a more active stance of the macroprudential authorities as it contributed to a build - up of vulnerabilities and risks to financial stability. let me now turn briefly to today ’ s programme. since its inception, macroprudential policy has gradually been implemented in europe against a unique financial and economic background, establishing itself as an autonomous economic policy area while interacting with other policy domains. this is a topic that will be addressed at this conference, in particular at the roundtable where the interaction between macroprudential and microprudential policies will be dealt with. this environment, characterised by crisis legacies, led, unsurprisingly, some macro

carlos da silva costa : overview of economic and financial challenges for portugal address by mr carlos da silva costa, governor of the bank of portugal, at the centenary of credito agricola mutuo, lisbon, 25 may 2011. * * * the celebration of the centenary of credito agricola mutuo ( mutual agricultural credit ) is an appropriate timing : 1. to highlight the relevance of banking activity in modern economies ; 2. to stress the crucial role of trust in the development of this activity ; and 3. to make a brief presentation of the key measures included in the adjustment programme in the field of financial stability – one of the three capstones underlying the adjustment programme and the new growth model of the portuguese economy. 1st – the relevance of banking activity in modern economies credit institutions play an important intermediation role between savers and investors, centralising the resources of the former and channelling them to the funding of investment. this financial intermediation between savings and investment leads to : 1. maturity transformation – deposits with typically short maturities are transformed into longer - term credits ; and 2. liquidity transformation – deposits, liquid, are transformed into credits, more illiquid. through financial intermediation, benefits may be reaped of a scale effect when mobilising savings : multiple low - value individual deposits are transformed into large credit amounts, allowing for the financing of large - scale investments. finally, savings obtained in a given region ( or country ) may be channelled to finance investments in other regions ( or countries ). through this intermediation, the banking activity benefits from economies of scale, making it possible to ensure risk diversification and the implementation of procedures for effective risk management and control. this translates into a reduction of risk for a given remuneration, or, alternatively, a better remuneration of savings for the same level of risk appetite. hence, the banking sector plays a key role in the efficient allocation of resources in a given economy, as well as in the provision of essential services for making payments, thus decisively contributing to sustained economic growth. banking activity can be said to be the “ circulatory system ” of the economy. a healthy – productive and competitive – economy necessarily requires a dynamic and efficient banking sector. 2nd – the crucial importance of trust and the role of regulation and supervision this crucial function of financial intermediation of the banking sector requires a relationship of trust between banking institutions and their customers. it also requires