to adhere to some critical factors. reasons for optimism first, our exercise needs to be more comprehensive than a standard stress test. in order for the comprehensive assessment to enjoy credibility, we must prove that we had deep insight into specific business areas, portfolios and individual credits as well as into processes and working guidelines. we must check whether accounting standards and workflows have been adhered to and ascertain whether the files of credit institutions faithfully reflect the contents of their systems. the comprehensive assessment is more comprehensive than any previous exercise – in terms of its scope and of the number of banks covered. we will examine in detail no less than 760 banking book portfolios. to reach our objective – to improve market confidence in euro area banks – it was essential to select more than 50 % of banks ’ portfolio exposure. the exercise would not have been seen as credible if a smaller set of portfolios had been selected. we will review some 135, 000 credit files. a total number of more than 6, 000 supervisors and auditors are currently conducting the review on the ground. for this review, we have and will collect vast amounts of data. i am aware that fulfilling our data requests puts quite a burden on banks, particularly the smaller institutions. we know that some of those face tighter constraints on the number of staff they can dedicate to specific tasks relating to the asset quality review ( aqr ) and that they may generally be less used to regular supervisory exercises such as the stress tests conducted by the european banking authority ( eba ). we did get some complaints which we take seriously. but even if we pare down our data requests to the essentials, we will still request tremendous amounts of data. bis central bankers ’ speeches by the way, let ’ s not trick ourselves – if there were no complaints at all, i would wonder whether we were doing a good job! and we need the data to do this job correctly. we need to stretch banks ’ and our own resources to the limit, not only to drill down to the detail, but also to allow for comparability. second, the two parts of this assessment complement each other : the aqr will give us a point - in - time picture of the state of banks ’ balance sheets. the aqr will ensure that the following stress test will be based on clean data, thus avoiding the weakness of the previous stress tests, in which the calculations were based on exposures valued only by the bank concerned.

and the resulting uncertainty is directly reflected in – among other things – refinancing costs and stock market valuations. even small deteriorations in a bank ’ s performance can sometimes suffice to provoke speculation and negative market reactions. this lack of confidence affects bank lending conditions, both local and cross - border, for firms in the real economy. banks in the euro area need to respond to these market expectations and uncertainties. they increase their capital ratios by retaining their earnings, holding off lending and avoiding additional risks. small and medium - sized firms in peripheral countries are particularly affected by the sustained shortage in credit supply. bis central bankers ’ speeches key factors for success the comprehensive assessment should contribute substantially to breaking this negative causal chain. it is not the only factor needed for reviving the loan business, particularly in the peripheral countries. but it is one of the important ones. restored confidence in the euro area banking sector should lead to lower funding costs for banks, which should be able to shift their focus back to their core business : lending to firms and households. in turn, this should lead to improvements in credit conditions for the real economy. for these effects to materialise, two elements are absolutely crucial. first, we need to succeed in establishing transparency. in order to positively impact on investors ’ perceptions of euro area banks, we must ensure that the exercise is sufficiently thorough for a true understanding of the banks ’ condition. any remaining uncertainty and doubts would be counterproductive. second, any weaknesses identified must be addressed in a swift and decisive manner. findings such as a lack of provisioning or the mis - valuation of assets must lead to direct and effective corrective actions, which ensure that adequate capital levels are reached or maintained. in this context, the exercise also offers an opportunity to highlight the balance sheet repair measures that have already been taken during the last months. the expectation of the forthcoming aqr has already had positive effects on the banks involved. we estimate, based on public information, that since july last year banks have strengthened their balance sheets by an amount of €104 billion, not only through capital increases, but also collateral revaluations and higher provisions. the realisation of these two objectives of transparency and repair should induce a significant change in the markets ’ perspective of the euro area banking sector. the comprehensive assessment thus offers a great opportunity, although seizing this opportunity may sometimes seem challenging – both for banks and for supervisors. for the comprehensive assessment to be a success, we have