in the chart on the right of slide 4. it shows that the role of credit risk seems to have diminished, while the contribution of other factors increased after mid - march, as liquidity concerns in money markets rose following the collapse of bear stearns, which induced banks to hoard more liquidity. box 10 of the fsr elaborates on these issues. with regard to the impact of the market correction on bank profits, you may recall that towards the end of last year, there was optimism that the extent of the size and spread of the costs of the turmoil across financial institutions and financial systems would be largely known once audited full - year 2007 financial statements had been published. as it turned out, the write - downs disclosed by many financial institutions went far beyond the expectations of late last year. the chart on the left of slide 5 shows that although major euro area banking groups did report large write - downs, these were significantly smaller than the income losses disclosed by their european peers from outside the euro area and by large us banking groups. after the disclosure of full - year 2007 financial statements, more write - downs were expected to be revealed over the following few quarters, and these expectations were broadly confirmed by the financial results for the first quarter of 2008. this brings me to one key lesson from the turmoil, namely that full and meaningful disclosure of exposures and losses is desirable, in order to reduce market pressures and restore confidence in financial institutions globally. it was precisely the lack of knowledge about banks ’ exposures and the great uncertainty about the valuation of these exposures which were key factors with pronounced impact on market indicators throughout the episode thus far. to illustrate this point, the chart on the right of slide 5 shows the cds spreads for global and euro area large and complex banking groups ( lcgbs ) : they increased after the start of the turbulence, and further widened sharply towards the end of 2007 and in early 2008. subsequently, they narrowed again significantly in conjunction with the more comprehensive reporting of banks ’ financial results, with the measures taken by the federal reserve in march and also with the indications that the financial institutions most hit by the turmoil were taking determined action to restore their balance sheets. that said, we should not overinterpret these positive developments in cds spreads as signs of banks ’ improved creditworthiness. there are a number of risks with potentially adverse effects on banks ’ profitability and capital positions. ii. sources of risk and vulnerability this leads me to the second part of

, the integration of the bulgarian national bank into the european system of central banks has been smooth, and the work carried out by the bulgarian national bank members in the respective escb committees has been noticeable, delivering high quality standards. the work of the bulgarian national bank, and its commitment to maintaining price stability, has also contributed to improving the living standards of the bulgarian people. no doubt, during the last years, bulgaria has accomplished significant progress. yet, as you know, the current economic situation is extremely challenging. so far, the bulgarian economy has been relatively resilient to the global financial crisis inter alia, thanks to the sound supervisory policies conducted by the bulgarian national bank. but this is no time for complacency in any respect. it remains essential for all economies, including bulgaria, to pursue very actively the reform process and to pave the way for sustainable macroeconomic developments that are of the essence in the medium term. bulgaria doesn ’ t have to take on these challenges alone. solidarity is a key feature of the european union and thus an inseparable part of the integration process. for instance, net transfers from the eu budget to bulgaria amounted to close to eur 600 million in 2007, about 2 % of gdp. and recently, the commission has put forward plans to accelerate payments under the european social fund for an amount of eur 19 billion in 2009 - 2010, an important part of which ( 35 % ) is destined for central and eastern europe. there is of course no substitute for sound policies. that is why i should like to encourage the bulgarian authorities in this very important occasion to be ambitious. to be ambitious enough in pursuing sound and stability - oriented economic policies that can bring sustainable economic growth in the medium and long term. this applies, in particular, to the conduct of sound fiscal policies and to the implementation of timely and consistent structural reforms that support the sustainability of the convergence process. all economic policy actors without exception need to be committed to the achievement of this goal. as the beautiful words written in front of the bulgaria ’ s national assembly remind us – “ there is strength in numbers ”. at the ecb, we stand ready to preserve and reinforce our dialogue with the bulgarian national bank, a dialogue that has proven very fruitful in the past. i am confident that our excellent working relationships will continue to serve both our institutions well. happy birthday, bulgarian national bank! chestit rozhden den bnb!