area. since mid - 2007, and in particular during the initial phase of the financial turmoil, large banks have overall tightened their credit standards for loans to enterprises somewhat more than smaller banks. the outlook for the economy in general and for individual firms contributed most to the tightening, in italy as well as in the euro area as a whole. the deteriorated access to capital market financing during the financial turmoil contributed significantly to the tightening of credit standards. it played a much more important role for large banks than for smaller banks, which rely less on capital market financing. the difficult liquidity conditions in the market also played a somewhat more important role for large banks, possibly because money market financing represents a greater share of their overall financing. all this may explain why the net tightening of credit standards was greater for large banks than it was for smaller banks. however, both large and smaller banks tightened their credit standards more on loans to large firms than on loans to smes. this was especially the case at the beginning of the financial turmoil, but the net tightening was still slightly stronger for large firms in the second quarter of 2009. this may be surprising, given that there is a general perception that access to finance has of late become more difficult in particular for smes. the pattern of a stronger net tightening for loans to large firms can also be observed in italy. this indicates that both large banks and large firms, which rely more on market - based financing, were initially more strongly affected by the financial turmoil than smaller banks and smes. since the second quarter of 2008, however, the differences in lending behaviour between large and smaller banks have diminished. this probably indicates that the economic downturn has played a major role in the general tightening of standards when evaluating the creditworthiness of firms. let me now turn to the question of how banks have tightened their credit standards. both large and smaller banks have done so predominantly by increasing loan margins. in italy, the net tightening of margins on average loans was similar to that for the euro area as a whole. at the euro area level, large banks increased margins on loans to enterprises somewhat more than smaller banks, which is in line with the overall stronger net tightening of credit standards. the increase in margins was particularly pronounced in 2008, but was lower in 2009, as illustrated by chart 3. besides the increase in margins, the non - interest terms and conditions of bank loans were also tightened considerably by banks. as examples, let me mention the increasing collateral requirements and loan covenants,

quite different in recent times. since the start of the app in march 2015, ten - year us treasuries have been yielding, on average, around 170 basis points more than ten - year bunds – an enormous difference that, to a large extent, reflects the divergence in monetary policy cycles that emerged in the wake of the euro area ’ s sovereign debt crisis. as a result, portfolio rebalancing during the ecb ’ s asset purchase programme has been more attractive for investors than it was during the fed ’ s qe programmes. the second factor is negative rates. in addition to yield differentials, the absolute yield level may also matter for investors, particularly if rates are negative. it may be no coincidence that net bond outflows were among the largest when ten - year german bund yields hit a low of nearly - 20 basis points last summer. in a recent survey among foreign central banks, 70 % of the respondents reported that negative interest rates in the euro area had encouraged them to adjust their allocations to the euro. this emphasises the strong amplifier effect of negative rates – they are highly effective in boosting portfolio rebalancing effects, both domestically and across borders, exactly when monetary accommodation might be needed the most. and third, we have political uncertainty and the role of the us dollar in the international financial system. the us dollar is the main reserve currency and us treasuries are the world ’ s most important safe haven asset, and as such benefit from a liquidity advantage. hence, in periods of elevated uncertainty, such as after brexit, investors may overweight us treasuries and underweight european assets. so, rebalancing out of us treasuries is always likely to be more limited than out of any other safe security. at this point i would like to draw three preliminary conclusions. one is that unconventional policy measures can significantly boost confidence, leading foreign investors to review their international portfolio allocations, in particular with regard to equity. a second conclusion is that the extent to which investors rebalance their portfolios towards foreign bonds is likely to depend on the structure of local bond markets, in particular the holding composition, and the risk - adjusted return investors can expect to receive from switching domestic and foreign bonds. this means that there can also be noticeable differences between euro area countries, as can clearly be seen when looking at the recent behaviour of japanese investors. slide 9 shows that japanese investors accumulated large positions in