vitor constancio : we need a coordinated european npl strategy. how to deal with europe ’ s market for lemons? opinion piece by mr vitor constancio, vice - president of the european central bank, 5 july 2017. * * * one of the most pressing issues for euro area banks is the nearly €1 trillion of non - performing loans ( npls ) on their balance sheets. while the average euro area npl ratio has declined gradually from a peak of 8 % in 2013, it still remains at 6 % and differences across countries are marked : six countries still have npl ratios of more than 10 %, significantly more in some cases. this is not just a problem for banks. the flip side of npls is over - indebtedness among households and firms, and this poses a macroeconomic challenge – banks restrict credit supply and distressed firms curtail investment, which in turn hampers economic growth. asset quality issues were exacerbated by the global financial crisis. when the crisis hit, the surge in npls blocked the ability of many banks to deal with distressed debt. npl resolution, though not a panacea for all banking problems, could bring significant benefits. it is not easy to estimate the effects of resolving npls. however, scenario - based analysis indicates that replacing npls with performing assets could increase the aggregate return on equity of euro area banks by more than 1 percentage point, with some countries ’ banking sectors gaining up to 5 percentage points. it is therefore essential to find a solution to the npl problem, but we must recognise that it will take time and no single instrument is likely to be a “ magic bullet ”. rather, it will require a comprehensive strategy involving a panoply of instruments. the ecb is already working on this and has issued clear guidance to the banks it directly supervises. but supervisory action is not enough on its own. the private sector and national and european authorities also have roles to play. several significant impediments affect the prices of npls, to varying degrees across euro area countries. the market for distressed debt can be characterised as a “ market for lemons ”. this is a situation where investors demand a premium to protect themselves from the uncertainty that better - informed banks will try to sell them assets whose credit quality is worse than it may seem on the surface. this results in limited market activity, as the prices that investors are prepared to pay for npls are much lower

william c dudley : job polarization in the region remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york, at the quarterly regional economic press briefing, new york, 30 may 2012. * * * good afternoon and welcome once again to the new york fed ’ s quarterly regional economic press briefing. i am pleased to have this opportunity to talk with the journalists covering our region – and through you, to the people in our district. this morning i will focus on regional economic conditions, with particular attention to job polarization, which i would define as the expansion of the number of jobs at the upper and lower ends of the wage and skill distribution and a shrinking of job opportunities for those in the middle. we will see how these trends are playing out in our region. as always, what i have to say reflects my own views and not necessarily those of the federal open market committee ( fomc ) or the federal reserve system. national economic conditions the u. s. economy is continuing to slowly recover from the after - effects of the housing boom and bust and the financial crisis. but the recovery has been disappointing. indeed, when we look back at economic forecasts made over the past three or four years it is notable that growth has systematically fallen short of both the federal reserve and private - sector forecasts. despite what has been an unusually accommodative monetary policy by historical standards, the economy has grown at only a 2. 1 percent pace over the last four quarters and the blue chip consensus forecast only anticipates a modest acceleration to a 2. 4 percent rate over the next four quarters. the headwinds retarding recovery are well known. consumers have been deleveraging in response to the large losses in wealth generated in large part by the collapse in home prices. housing activity remains depressed for many reasons. these include the large shadow inventory making its way through the foreclosure pipeline, tight underwriting standards for new mortgage origination, and the sharp slowdown in household formation. although the corporate sector as a whole is now reasonably healthy, there still is a significant constraint on the availability of credit to small business. fiscal policy has become restrictive as state and local governments have cut expenditures in response to revenue shortfalls ; and the uncertainty about how congress and the administration will address the 2013 federal “ fiscal cliff ” is likely to inhibit hiring and investment by business. global economic growth has slowed as european activity has stagnated