repo rates for transactions using specific collateral – which are driven by the need to source a specific security – have increased by slightly less than 50 basis points as collateral scarcity has implied some downward pressure on these rates. this collateral scarcity is reflected in persistent negative spreads of some short - term repo rates to €str, which is particularly pronounced for the nongeneral collateral ( non - gc ) rates ( chart 2 ). chart 2 average spread of short - term repo rates to €str over 2022 ( basis points ) sources : brokertec / mts and ecb calculations. notes : gc refers to general collateral and cash - driven repo transactions. non - gc refers to non - general collateral and collateral - driven repo transactions. the chart displays the average spread of the respective repo rate to the €str since the beginning of 2022. the latest observations are for 13 september 2022. moreover, there has been a widening of the spread between short - term government bill rates and swaps with the same maturity ( chart 1 ). this can be mainly attributed to demand / supply imbalances in the market for short - term government bills, which is partially driven by the level of excess liquidity and increased demand for short - term high - quality assets. this increased demand is also motivated by the current interest rate uncertainty and high level of volatility. these demand / supply imbalances of highquality collateral with short - term maturities can also be observed in other jurisdictions of major central banks for similar reasons. the increase of the dfr by 75 basis points to 0. 75 per cent that we decided last week will only become effective with the start of the new maintenance period today. to preserve the effective transmission of last week ’ s rate hike by 75 basis points and safeguard the orderly functioning of money markets, the governing council also decided last week to temporarily remove the zero per cent interest rate ceiling for remunerating government deposits held with the eurosystem. until 30 april 2023, the remuneration ceiling government deposits will remain at the €str or the dfr, whichever is lower. this temporary adjustment was in recognition that the faster than initially expected pace of monetary policy normalisation gave only little time for government deposit holders to adjust and plan for alternative arrangements. the temporary adjustment allows the remuneration of government deposits to follow money market rates, which reduces the risk of an abrupt outflow of these deposits

level capital ratio under the baseline, medium and severe stress scenarios is projected at 16. 1 per cent, 14. 7 per cent and 13. 3 per cent, respectively, by march 2024, well above the regulatory minimum of 9 per cent. liquidity risk analysis conducted to capture the impact of any possible run - on deposits shows that in an extreme scenario of sudden and unexpected withdrawals of around 15 per cent of uninsured deposits along with the utilisation of 75 per cent of unutilised portion of committed credit lines, would reduce liquid assets at the system level from 21. 1 per cent of total assets to 11. 4 per cent, but it would not turn negative. furthermore, stress tests on banks'credit concentration – considering top individual borrowers according to their standard exposures – show that even in the extreme scenario of the top three individual borrowers failing to repay, no bank would face a drop in the capital ratio below the regulatory requirement of 9 per cent, although two banks would see a decline in the capital ratio below the regulatory minimum inclusive of the ccb requirement ( 11. 5 per cent ). the recent failure of few banks in some aes jurisdictions showed how unprepared they were to manage the transition to rapid increases in interest rates by central banks, 4 / 7 bis - central bankers'speeches which exposed fault lines in their balance sheets. as interest rates rose, unrealised valuation losses spiked in their held - to - maturity ( htm ) portfolios, which are not markedto - market. the aggregate valuation losses in the u. s. banking system grew from us $ 8 billion at the end of 2021 to more than us $ 620 billion at the end of 2022. sizable portfolios of uninsured deposits exacerbated the impact of unrealised valuation losses, leading on bank runs. inadequate capital positions worsened their risk profiles ( in the chart, the distance between blue and red dots shows the erosion of common equity tier 1 capital ). in the indian context, if a shock in the form of a 250 basis points parallel upward shift in the yield curve is applied, the mark - to - market impact on the htm portfolio of banks ( excluding unrealised losses ) would reduce the system level capital ratio from 17. 1 per cent in march 2023 to 13. 7 per cent, which is still above the regulatory requirement. digital transformation the financial sector in india is on the cusp of a transformative