iii liquidity requirements. 3. increased risk aversion. this scenario investigates the risks arising from a global unwinding of the search for yield. it assumes an abrupt increase in investor risk aversion worldwide, which results in stock price declines and a marked increase in corporate bond spreads, thereby raising interest rates in the more risky market segments. this would trigger a recession in the united states with negative implications for the global economic outlook. the details of these scenarios and the underlying methodologies are discussed in detail in the latest ecb financial stability review from may 2013. just let me say that they are designed to account for a number of transmission channels and the size of the shock is based on historical evidence. ( chart 5 ) the scenarios generate a rich set of results, but let me focus on the implications for bank capital. under the baseline scenario, the core tier 1 capitalisation of euro area large and complex banking groups would increase from 11. 2 % in the fourth quarter of 2012 to 11. 3 % by the end of 2014. certainly, with regard to the findings of the adverse scenarios, they crucially depend on the implementation details of the individual scenarios. nevertheless, we observe that a scenario configuration involving a rise in interest rates and asset price declines would in general tend to exert a negative influence on banks ’ solvency positions. this being said, the decline in the large and complex banking groups core tier 1 capital ratios under the adverse scenarios is found to be relatively mild, which is a sign of resilience among the largest euro area banks also reflecting significant capital raising efforts in recent years. specifically, the average core tier 1 capital ratio would decline by 0. 4 percentage points in the funding stress scenario, by 0. 6 in the sovereign debt crisis scenario and by 1. 1 in the global risk aversion scenario. however, the average numbers mask some dispersion across euro area countries. bis central bankers ’ speeches this analysis is focused on the banking sector. the situation in the euro area insurance sector differs somewhat. insurance companies are also to some extent exposed to risks from shifts in sovereign bond yields and global risk aversion. forward - looking analysis of the assets and liabilities of the euro area insurance sector indicates that the impact of these risks would remain limited due to comfortable capital buffers. for the euro area insurance sector, low yields on highly rated government bonds can constitute a solvency risk in the medium term. this holds in particular for those jurisdictions where a market

peter praet : interview with bloomberg interview by mr peter praet, member of the executive board of the european central bank, with bloomberg, conducted by mr alessandro speciale, mr jeff black and mr jonathan ferro, and published on 17 november 2015. * * * how can we estimate the impact of the tragic events in paris? i would like first of all to express our profound sympathy for the victims. it ’ s something that concerns everybody. now when we talk about the possible impact on the economy, in general, we have to take a holistic view. it ’ s not so much the economy as the geopolitical environment that is impacted by these events. the impact remains to be seen, beyond the tragic events of last week. the main issue is the economic context of such events, which is a rather difficult one, we cannot deny that. it ’ s difficult because the euro area is still going through the aftermath of a balance sheet recession which started in 2008. as of today, the gdp of the euro area has still not recovered the level it had in 2008. that ’ s one thing, and the second thing is the management of immigration in europe which creates some strains at the political level in different countries. how is the next round of staff economic forecasts shaping up? it ’ s too early to tell, of course, because the teams are working on it. but let me say that when we look at the flow of information so far, the economy is still in a cyclical recovery. incoming data have been supportive to our base scenario. but we are also very well aware that downside risks are present and even that they may have increased in light of the weekend ’ s events. on the inflation side, the return to close - to - two - percent is at risk of being pushed backwards again. i know that today we just had the final data for october for inflation, we had 1. 1 for the core inflation and 0. 1 for headline inflation. but we remain in an environment of weak price pressures in the medium term. that has not really changed. we will have to see what the new projections show. hard data have been a little bit less encouraging. we see q3, which was more or less in line with what we were expecting, but on the low side of estimates. we also had, from the german side, slightly less positive news on the real economy. it ’ s not sufficient to say that the base scenario has