earned see for instance f. mishkin, “ not all bubbles present a risk to the recovery ”, financial times, 9 november 2009. by euro area large and complex banking groups in the second quarter of 2009. this was the highest level seen in the past five years. the increase in revenues from the core banking business and the considerable cost - cutting have nevertheless boosted profitability this year. income from trading has recovered strongly in this period, also improving banks ’ performance. the restored profitability has recently enabled some european banks to start repaying the capital injections provided by governments, suggesting greater robustness in the system. however, the trend worsening of non - performing loans should not be considered over yet – it might turn out to be worse than projected. banks shouldn ’ t assume that it ’ s time to go back to previous practices, using their profits primarily to remunerate staff and reward shareholders. they need first of all to give priority to further improving their capital position, as a buffer against worst - case scenarios. supervisory authorities should keep an eye on banks for this reason. banks need also to plan for more stable and sustainable long - term sources of financing. it ’ s interesting to note that non - financial corporations have successfully made large bond issues, while monetary financial institutions have been much more timid, compared with their precrisis levels ( see chart 4 ). since mid - 2008, the annual growth rate of debt securities issued by monetary financial institutions roughly halved to around 4 % in september. by contrast, the growth rate of debt securities issued by non - financial corporations increased over the same period from around 3 % to 15 %. the support mechanisms provided by governments have not been fully utilised, in particular with respect to guarantees ( see chart 5 ). in any case, the situation remains imbalanced. some banks are still very reliant on unlimited central bank financing. these cases have to be addressed rapidly by the responsible national authorities. otherwise they will create a burden on the other banks, by overbidding for and hoarding liquidity. the exit strategy let me turn to the exit strategy. this is an issue on which many have spoken recently. i won ’ t repeat the arguments which have already been expounded very clearly. the exit strategy has two dimensions. one concerns the non - standard measures which have been implemented to improve the functioning of the transmission mechanism. the other relates to the stance of monetary policy, which can be calib

holders have also seen their wages go up. some have proactively adjusted their spending to help offset higher debt payments. many also report higher levels of savings available to offset increased payments. 2 / 3 bis - central bankers'speeches overall, the evidence suggests that households have the flexibility to continue servicing their debt at higher rates. we will be watching the data closely for signs of increased financial strain among households, both mortgage holders and non - mortgage holders. we'll also be watching how the labour market evolves, since the biggest factor that determines whether someone can service their debt is if they have a stable income. higher interest rates are also affecting businesses. higher rates are slowing demand for the goods and services that businesses sell, while also increasing their financing costs. so far, the financial health of large businesses appears solid. but smaller businesses are showing more signs of financial stress. insolvency filings by smaller firms have recently jumped after several years of below - average filings. there is some indication that this recent increase could be a catch - up or normalization, and the timing could be driven in part by the expiry of government support programs put in place during the pandemic. turning to canadian banks, overall, credit performance remains strong. banks are proactively contacting customers who are facing payment increases at renewal and working with them on a payment plan. they have also been putting more money aside to cover future loan losses, and they continue to maintain healthy capital and liquidity buffers. this means that even if financial conditions and credit performance deteriorate, banks are positioned to absorb losses and continue to provide credit. in the non - bank financial sector, more frequent volatility in financial markets in recent years has led to an increased focus on liquidity risks. at the same time, some firms are increasingly using leverage, or borrowed money, to fund trading activities. this makes them more vulnerable in the event of large market swings. let me close by repeating an important point the governor made at the beginning : the connections in the financial system mean that if risks materialize in one sector, they can spread quickly. this puts a premium on preparedness. the proactive steps taken by financial system participants have been positive. and they need to continue. a stable and resilient financial system benefits all canadians. the governor and i will now be happy to take your questions. 3 / 3 bis - central bankers'speeches