2008 to 8. 5 % in september 2011. banks ’ financial robustness improved due to a considerable strengthening of the capital base : the cumulative increase of the core tier 1 capital in the banking system was 28. 6 % over the period, with risk - weighted assets increasing by 2. 8 %. all but two of the main banks are expected to have met the 9 % target by the end of 2011. in the remaining two cases, the core tier 1 ratio stood slightly below 9 % and the target will be met in the first quarter of 2012. banks were capitalised through market - based solutions, a clear indication of the portuguese banking system ’ s overall financial strength. the strengthening of the banks ’ capital position will continue into 2012. current capital needs arise from the combined effect of more demanding capital requirements in the adjustment programme ( a core tier 1 ratio of 10 % by the end of 2012 ) and three additional factors : the recommendation made last december by the european banking authority ( eba ), aimed at creating a temporary buffer for sovereign exposures in the main european banks ; the results of the special inspections programme ( sip ) on the valuation of banks ’ assets ; and the impact of the partial transfer of banks ’ pension funds to social security. bis central bankers ’ speeches the eba ’ s recommendation must be followed by june 2012. the prudential impact of impairment corrections following the special inspections programme and the pension funds ’ transfer was deferred until june 2012, in line with the eba timetable and as agreed in the second review of the economic and financial assistance programme. banks are encouraged to find market - based solutions to strengthen their capital positions. however, in the event that not all capital needs can be met from private sources, public funds are available from the back - stop facility created under the programme, with amounts available that comfortably exceed the estimated capital needs. deleveraging also proceeded as planned in 2011. the loan - to - deposit ratio stood at 146 % in september 2011, declining by more than 20 p. p. from its june 2010 peak. the decline in the transformation ratio resulted both from higher deposits and sizeable asset sales, both domestic and foreign. while remaining at historically high levels, financing from the eurosystem stabilised, whereas it increased for euro area banks as a whole. deposits have been quite resilient, increasing 8 per cent year - on - year in november 2011. higher resident customers ’ deposits, particularly households, more than compensated the decline in

non - residents ’ deposits. households have been adjusting their portfolios in a context of growing risk aversion and higher relative remuneration of deposits. even if a slowdown of deposits is to be expected, their resilience is a clear indication of the public ’ s trust in the domestic banking system. credit granted by resident banks is declining, partially reflecting the deleveraging of the private sector. the composition of loans granted to non - financial corporations raises concerns. indeed, the decline in loans is concentrated in the segment of small and mediumsized enterprises. in contrast, loans to both state - owned enterprises and to the largest private sector corporations have been increasing, as these corporations are replacing credit previously obtained abroad with loans taken from portugal - based institutions. looking forward, it is crucial that, as deleveraging proceeds, banks continue to provide an adequate level of financing to the most productive sectors and firms in the economy. banks ’ deleveraging strategies should therefore continue to focus on the sale of non - strategic assets as well the sale of credit ; an increased use of stable sources of financing ; and the reinforcement of capital. it is also critical to meet the fiscal consolidation targets and successfully restructure the state - owned enterprises sector to avoid crowding - out credit to the productive sector. of course, it is not all good news. as expected, the unfavourable economic and financial environment has taken a toll on banks ’ profitability. however, the negative results announced for 2011 should be examined closely, to disentangle current results and one - off factors. indeed, results in 2011 were significantly affected by non - recurrent factors such as the impact on banks ’ balance sheets of the transfer of pension funds to social security and the corrections arising from the special on - site inspections programme. these “ one - off ” effects penalised results in 2011, but imply more robust balance sheets going forward. if we put aside these one - off effects, we see that banks ’ profitability remained positive even if at low level. iv. concluding remarks let me conclude by reiterating that portuguese banks are now more capitalised, more transparent and less leveraged than a year ago. monitoring and supervision were significantly enhanced and the regulatory environment is much improved. the financial assistance programme ’ s financial stability measures and targets are well on track. this said, the challenge remains huge and there is no room for complacency. combining mounting capital needs with deleveraging requirements, while