##equacy and liquidity are at exceptionally high levels. the net external borrowing of the country decreased by euro 220 million only in the last quarter of the last year, and by euro 280 million, or by one fourth, over the entire last year. finally, immediately prior to our decision to redesign the monetary instruments, the ministry of finance announced cut of budget expenses by 5 %. to summarize, we face low level of risk in the external and the banking sector, low to moderate level of risk in the public sector, the denar exchange rate is stable, the inflation is lower than in the euro area, and the economic activity decelerates. what would be more suitable in a situation like this than to send signal that there are conditions for enhanced banking activity without jeopardizing the stability? this is exactly the goal of our measures. it is not our intention just to conclude that the credit growth does not develop as expected, and to revise the rate downward all over again. we consider that the credit growth could range around 7 – 8 % without jeopardizing price and financial stability, and we clearly signalize this. bis central bankers ’ speeches the question is whether the banks will follow our signal? the promptness and intensity of banks ’ response depend on the power of monetary policy transmission. the recent researches conducted by my coworkers show that the power of monetary policy transmission in our banking system is limited. this was yet another reason to redesign the monetary policy instruments. we hope that the new monetary framework will improve the monetary transmission. otherwise, we will keep on advancing the monetary instruments setup. cb bills are the national bank basic instrument used to absorb excess liquidity by banks. cb bills are not investment vehicles. in many countries there are no cb bills. when the national bank intends to absorb more liquidity it could make the interest rate more attractive for the banks. but, if it considers that it should not sterilize such excess liquidity, it will make the interest rate less attractive or will restrict the amount allowed for the banks to subscribe. distinguished ladies and gentlemen, at this very conference last year, i also said that the national bank will not build its relations with the banks from the position of arrogance. quite contrary, the banks are our partners. therefore, the national bank will keep on informing and consulting with the commercial banks about the regulatory measures. in this respect, presently we analyze the latest request of the banking association concerning the treatment of fore

sabine lautenschlager : the european banking sector – growing together and growing apart speech by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the single supervisory mechanism, at the lse german symposium, london, 2 march 2017. * * * two major events provide the frame for my speech today. both of them took place in june – one in 2012, the other in 2016. one of them took place in brussels, the other here in the united kingdom. one of them made europe grow together ; the other made europe grow apart. on 28 june 2012 in brussels, the leaders of the eu decided to take banking supervision to the european level and explore the idea of a fully fledged banking union. they took a decisive step towards a more united europe. on 23 june 2016, the people of this country voted to leave the european union. they took a decisive step away from a united europe. both events – while very different in nature – will fundamentally change europe. from the perspective of banks and their supervisors, both events have had and will have a huge impact. let us take a closer look. growing together – european banking supervision in june 2012, the euro area was a bad place to be – if you were an investor, a bank or a country that had lost the trust of the markets. on 1 june that year, the financial times wrote “ spain suffers €100 billion exodus ”. in the days thereafter, its front - page stories focused on ailing portuguese and spanish banks. in mid - june, its headline was “ fears rise over eu handling of debt crisis ”. by then the markets had driven the bond yields of some euro area countries to new heights. in other words, if the governments of those countries wanted to sell bonds to finance their debt they would have to pay much more. the media started speculating about a break - up of the euro area, as did some politicians. two weeks later though, something had obviously changed. on the last day of june, the financial times, on its front page, said “ markets rebound following eu deal ”. what had happened? what had happened was that an eu summit had taken place in brussels. there, the leaders of the eu agreed on a package of measures to stabilise the euro area. they decided on a €120 billion pact for growth ; they decided that the rescue funds, the european financial stability facility and the european