what extent? the first step for a unified european strategy is acknowledging its need. in the face of nonnegligible risks to financial stability and financial integration, as well as the referred heterogeneity across banks and economies, a debate should be launched on the possible mismatch between the repercussions of high npl levels and the current strictness of the eu legal and regulatory framework. in particular, the brrd was designed for a steady - state, which is still far from the current situation in financial markets, and state aid rules, while placing financial stability at the core, seem to provide little flexibility to address the systemic nature of the problem. to reduce npls in a significant and swift way, these constraints must be addressed – but only a european approach can do so while ensuring the necessary level playing field, an essential precondition for the coordinated action that should follow. this discussion – ideally complemented by enhanced flexibility – would provide decisive clarity on the rules of the game and likely pave the way for bolder solutions at national level, especially in 1 / 2 bis central bankers'speeches countries where the npl challenge is more pressing. it could also be the starting point for considering and conceiving a more ambitious strategy to effectively reduce npl stocks across europe. a strategy with the necessary firepower to enhance national efforts and complement ongoing initiatives in the ssm and other european fora. some promising european approaches have been recently put forward and deserve to be further explored. 2 / 2 bis central bankers'speeches

still strong on the back of a buoyant labour market and fiscal stimulus, activity has slowed since the start of the year in the eurozone, japan and china. second, some policy developments have contributed to either increasing such de - synchronisation – such as fiscal stimulus in the us – or raising overall growth uncertainty, as in the case of rising trade conflicts. one key consequence of such economic and policy developments has been renewed upward pressure on the us dollar, which has benefitted from the further rise in interest rate differentials ( nominal and real ) between the us and other major advanced economies, and from the outperformance of us equities. the combination of rising growth and policy uncertainties, weaker commodity prices – with the notable exception of oil – from march to august 2018 and a stronger dollar has hit emerging countries ’ financial assets particularly hard. since it peaked in february 2018, and despite some recovery in september, the jpmorgan emerging markets foreign exchange index has declined by 13 %. over the same period, the msci index of emerging market equities has shed 13 % and the emerging markets bond index plus ( embi + ) sovereign spread over us treasuries has widened by 60 basis points. however, performances across the emerging world have been very disparate, ranging from severe financial stress to near - stability. judging by these different reactions, it appears that the less favourable global backdrop has led investors to refocus on relative country vulnerabilities, specifically with respect to the rising external liabilities of governments and large corporations, fiscal trends, exposure to global trade and value chains and, in some cases, the level of inflation and the degree of anchoring of inflation expectations. how the changing environment has affected south africa if one excludes the most dramatic sell - offs experienced by the turkish lira and the argentine peso, the south african rand has been among the most affected emerging market currencies this year – losing 13 % on a trade - weighted basis since its 26 february peak. this depreciation, together with the 98 basis point increase in the yield on the r186 benchmark government bond and the 60 basis point widening in the country ’ s five - year credit default swap spread illustrate the vulnerability of south african financial assets to the changing world environment i have just described. why has this happened? in contrast to some of its emerging market peers, south africa has managed to keep its foreign currency - denominated external lia