activities in europe and has, hence, supported the smooth transmission of our common monetary policy across the euro zone. despite this achievement in the field of financial integration, it has become evident that this is not enough. in particular, in the field of retail payments and securities settlement i see a lot more to do! this monetary union was culminated with the establishment of the central bank under the banking act of 1875 and the introduction of the “ deutsche mark ” as single currency. in my intervention today i will, therefore, focus on two projects that aim to address the fragmentation still present in the field of retail payments and securities settlement : the single euro payments area ( sepa ) and target2 securities ( t2s ). let me start with sepa. as you are certainly aware, just recently, we published the eurosystem ’ s 7th progress report on sepa, in which we welcome the overall progress made in delivering sepa but also indicate areas where more work is still needed. certainly, many stakeholders want to bring the sepa project further and have contributed to its progress so far. first, enormous progress has been made by the payments industry in delivering sepa. in particular, the sepa direct debit design and launch in november 2009 is, in my view, the most remarkable development on the payments industry side. the sepa direct debit is a key payment instrument as it is the first time that a utility company, like, for example, your telecommunications provider, can charge your account regardless of the country of its location and regardless of the location of the bank at which you have your account. this represents a big improvement as it finally allows customers to conduct all euro payments within europe from one single account. the sepa direct debit is good for everyone. companies and individuals will benefit from increased competition and will be able to get the payments provider that best fits their needs. in germany, the implementation of the sepa direct debit should not represent a big challenge as the sepa direct debit scheme is very similar to what already has been available at national level for a long time. in this respect, i encourage german stakeholders to find a pragmatic solution regarding the mandate migration. such solution should limit the efforts for companies as well as for customers. second, i believe that we should not forget the role public authorities are playing to get sepa up and running. all but one of the eu member states have finalised the transposition of the payment services directive in their national

assets. the bank conducted a follow - up analysis in the recent on - site examination to analyze how many of the loans classified in the previous examination ( 1993 - 94 ) were later “ written off and others ” in relation to financial losses ( “ others ” are defined as specific loan - loss provisions, losses from support by renunciation of claims, and losses from sales of nonperforming loans to the cooperative credit purchasing company [ ccpc ] ). these empirical studies using the tracing method suggest the following four points of importance for enhancing credit risk management. ( 1 ) importance of strengthening the early warning functions it is vital to control loans classified as “ substandard ” ( s ) because the likelihood of loan losses in terms of “ write - offs and others ” reaching a substantial size in the long term may vary substantially depending on the adequacy of the long - term management of this classification of loans. ( 2 ) importance of utilizing statistical methods which cover the life - span of loans for example, for loans classified as ( s ), there is a tendency for the loan - loss ratio to rise after the third year following the assessment. ( 3 ) importance of avoiding loan concentration financial institutions with highly concentrated loans in terms of industry had higher loan - loss ratios, while institutions with diversified loan portfolios had relatively low ratios. ( 4 ) importance of gathering financial institutions ’ own default data for risk quantification the estimated losses may be understated when only publicly disclosed bankruptcy data are used since losses incurred through loans against “ de facto bankrupt borrowers ” and recipients of financial support are not covered in such data. the latter type of losses accounts for a significant share of outstanding losses. the tracing method covers all these data and enhances establishment of financial institutions ’ own default data for credit risk quantification. on our part, the bank of japan will continue to check and monitor the credit risk management systems at financial institutions on the off - site basis and also during the on - site examination in a more risk - focused, seamless and flexible manner, taking individual institutions ’ circumstances into consideration. in addition, the bank will continue to research methods of quantifying credit risks as well as conducting follow - up analysis of the tracing method, in line with the worldwide trend to further enhance credit risk management. revision of the wholesale price indexes to 1995 base introduction the wholesale price indexes ( wpi ) system is one of the three sets of price index statistics presently compiled by the bank of