countries ’ currencies would devalue. the total effects from this very bad scenario were limited, and the capital adequacy ratio ( car ) continued to be above the limits allowed. nonetheless, because the aim is for greek banks to have sufficient capital and liquidity buffers as well as to minimise any negative spill - over effects on the greek economy from the global financial crisis, the € 28 billion state banking support package has been arranged, thus ensuring that, even under the very bad scenario, tier 1 capital will remain between 8 - 10 % in 2009 - 2010. the enhanced preparedness of the greek banking system. the current financial turmoil found the greek banking system in a state of revision of its strategic priorities in line with basel ii. i will not cite the numerous and detailed acts of the bank of greece ( and individual consultations ), which called the banks to strengthen internal control systems and risk management, built high capital ratios exceeding 11 % and maintain high liquidity ratios. for this reason, the bank of greece, joining a small number of eu countries, imposed liquidity ratios in 2005, which, moreover, lean towards the severe side. indeed, thanks to these buffers in october 2008, when, due to the increasing global uncertainty after lehman ’ s debacle there were some withdrawals of deposits, the greek banks surmounted the situation without great difficulties. the bank of greece, since 2006, has asked banks to reduce their credit risk, control better their credit expansion, decrease the ratio of non performing loans and provide incentives for write - offs. by mid - 2008, banks were already well engaged to meet the target of the 3½ % ratio for non performing loans for the end of 2008, but the global crisis has interrupted this downward trend of npls. it should be noted that, the outburst of the ongoing financial turmoil found greek credit institutions without exposures to toxic assets, quite solvent and in the midst of a tidying - up process. this also explains the continuing high rate of return on equity during the first nine months of 2009 ( 14 % ) and the car around 10½ %. since the beginning of the global crisis in 2007, large banks were required to submit a strategic plan concerning the funding of their future activities. on the basis of pillar 2 of basel 2 framework, greek banks have been advised to adjust their risk appetite and to increase their capital base in accordance with the results of a series of stress tests, and in such a way that

measures is to restore as far as possible normal market conditions and, along with the interest rate cuts announced by the ecb, to bring interest rates back to levels that do not hinder growth. the government guarantee should also contribute to the reestablishment of banks ’ mutual trust and to the normalisation of interbank lending. there are positive signs in this area as greek banks have started lending each other bigger sums for longer duration than overnight or one week. however, the process may encounter unexpected hurdles and, therefore, may be lengthier than it is desirable. necessary regulatory changes : what changes might be envisaged to financial regulation and the structure of the financial sector as a result of the current crisis? i will try to answer taking into consideration what is under discussion in the various international fora, bearing in mind the global nature of the current turmoil. as you are aware, a number of reforms have been put forward at the european and international level, notably by the ecofin council and the financial stability forum ( fsf ), and have recently been reflected in the declaration of the g20 summit. however, we will have to bear in mind that any changes will be implemented gradually and, in some cases, only after the crisis is over, especially those aiming to the control of risk taking, as the system is currently in reverse mode. there is a need for fair evaluation and strengthening of regulatory regimes, prudential oversight and risk management, and ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances. in the same vain and to the extent that they represent a substantial factor for the smooth functioning of markets, credit rating agencies will be required to meet specific standards. the philosophy of auto - regulation and “ markets know best ” as they care for the interests of the economy and of themselves has been wiped out by the ongoing traumatic experience. but we don ’ t want to go to the other extreme of over - regulation and nationalisation of the banks. the banking system will probably have to operate with higher capital buffers than prior to the crisis, in order to address specific loopholes revealed by the crisis, to meet increased capital requirements calculated under pillar 2, especially after the data concerning the crisis period will be fed into the internal capital calculations. the merits of introducing a limit on the leverage ratio of financial institutions are also under examination, which also might call for more capital. liquidity risk now urges for more attention by both banks and regulators