increases the intensity of supervision, for the groups in scope. as such, ring - fencing will remain a focus for the pra – as well as for the banks themselves – in the coming years. how will the next crisis be different? financial crises generate significant and persistent costs. the bank of england has estimated that the costs of crises amount to 75 % of gdp on average. 1 the previous crisis resulted in the government providing £65 billion of capital to rbs and lloyds to prevent them failing and disrupting the provision of vital banking services to their customers. since then, a comprehensive regulatory reform package was developed – which in large part has now been implemented – to reduce the likelihood that such a crisis could happen again. brazier, a., ( 2016 ), ‘ a macroprudential approach to bank capital : serving the real economy in good times and bad ’, speech available at https : / / www. bankofengland. co. uk / speech / 2016 / a - macroprudential - approach - to - bank - capital - serving - the - real - economy - in - good - timesand - bad. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx in 2010 the government established the independent commission on banking ( icb ) to make recommendations to improve financial stability and competition in the banking sector. the icb recommended that the core retail banking operations of uk banking groups should be ring - fenced from any international or investment banking activity in their groups. the icb argued that if retail banking operations had been ring - fenced prior to the crisis, this would have reduced the likelihood that the banks would have needed government support. the icb ’ s recommendations formed the basis of the banking reform legislation passed by parliament in 2013. this set out the core banking activities which must sit in a ring - fenced bank, as well as the ‘ prohibited ’ activities that must be separated from the ring - fenced bank or stopped altogether. the legislation also specified the degree of separation required. ring - fenced banks must have the capability to make decisions independently of their groups and should not be operationally dependent on group entities which undertake prohibited activities. ring - fenced banks must also have sufficient financial independence and have their own capital and liquid resources. any exposures to the rest of the group must be limited and on commercial terms. all large uk banking groups – defined as

do you expect it to be next year? the estimate for this year is about 7 percent, and for the next year it is somewhat higher. in which direction will the interest rates on loans and deposits move next year? the downward trend is likely to continue, although at a slower pace. the european central bank reduced the basic interest rate to 0. 75 percent in order to stimulate the economic growth. the national bank of the republic of macedonia maintains it at 3. 75 percent. why not reducing it down to 1 percent in our country, too, which will reduce the interest rates on loans as well? in a highly euroized economy as the macedonian, it is necessary to motivate economic agents to demand denars, not euros. therefore, interest rate parity on denars and euros must be kept at an appropriate level that stimulates the demand for denars. in the last three years we have reduced that parity from 8 percent to only 3 percent. further reduction is a process that depends on the resilience of the economy. macedonia will have to save more what are your expectations for the macedonian economy in 2013, which is expected to be perhaps more difficult and more turbulent than this year? what, according to you, will be the biggest economic challenges and problems next year? it will be another year full of uncertainty for the world and especially for the european economy. thus, the export demand for macedonian products is unlikely to improve. so, we cannot expect that to boost economic growth. however, our expectation for the economic growth in macedonia is to be much better than this year, driven by diversification of the production into new export - oriented facilities that started to work this year, or will start to work in the next year, as well as infrastructural facilities for which funding has already been secured from foreign sources. both politicians and economists globally are of a divided opinion in terms of the economic policy that should be conducted in order to emerge from the crisis. some advocate austerity, others encourage spending to stimulate growth. which policy you prefer and think is right for macedonia? according to me, those are “ false ” discussions. if a country has a room for increased spending, certainly now is the time to stimulate the economy. but unfortunately, there are not many such countries worldwide. developed economies were spending more than they could afford for years, and now they do not have any room for fiscal stimulus left. it is easy to say that now you have to