thereby provided the banking system with unlimited liquidity support, at fixed rates, with maturities of up to six months. we have just decided to maintain this procedure for as long as needed, and in any case beyond the end of 2009. as a result of all of these measures, most of which are highly non - standard, banks have continued to have broad access to euro liquidity. structural issues report on housing finance in the euro area let me now turn to the second topic, namely housing finance, which is covered in this year ’ s ecb structural issues report. as in previous years, i will present to you the general thrust of our report, which will be published later today. the report analyses trends and differences in the characteristics of housing loans, in the funding of bank loans, and in the spread between mortgage interest rates and the funding costs of banks. it also compares housing finance in the euro area, the united kingdom and the united states. generally, euro area banks are significantly stricter in terms of non - interest conditions on loans, partly explaining the significantly smaller sub - prime market here. on the funding side, relatively stable bank deposits continue to be the main source of funding for bank loans in the euro area, with much less emphasis on the “ originate - to - distribute ” function. these observations support the conclusion that housing finance in the euro area should be more resilient to shocks. housing finance has an impact on the transmission of monetary policy to the economy. two observations deserve particular attention. on the one hand, a higher degree of competition among mortgage suppliers leads to a strengthening of that transmission. on the other hand, the introduction of greater flexibility in mortgage contracts via the temporary suspension of payment or maturity extensions would result in interest rate changes having a smaller immediate impact on the economy. finally, it is clear that we have to assume a greater amount of retention on the part of banks, both as regards the amount and the characteristics of loans granted to households and as regards their sources of funding. implications of the current crisis for euro area enlargement let me now turn to the third topic, which relates to the implications of the current crisis for euro area enlargement. the global economic situation has deteriorated significantly since september 2008 as a result of the intensification of the financial crisis. some central and eastern european countries have also been hit hard, thus highlighting previous vulnerabilities. these weaknesses relate in particular to domestic and external imbalances, unsound fiscal

assets for themselves, thus reducing the quality of portfolios offered on sale. beyond market failures, regulatory and features of the judicial system, such as structural inefficiencies in debt and collateral enforcement, also contribute to the lack of market turnover. legal procedures needed to collect a simple claim take too long and cost too much in many euro area countries. some of these costs cannot be recognised in the values of npl, but rather, according to accounting rules, are charged to the general expenses. this discrepancy between economic and book value of npls is yet another disincentive to increase supply, especially for those banks that are not sufficiently profitable or that have thin capital cushions ( see chart 7 ). 7 / 13 bis central bankers'speeches on the demand side, investors are also deterred by high uncertainty around recoveries and their timing. moreover, barriers to entry such as licensing requirements further inhibit demand in some euro area countries. the direct consequence of the conditions, under which the npl market operates, is a wide gap between bid and ask prices. the data on the size of that gap is scant but it is thought to be very large. for instance, estimates suggest that, for a fully collateralised non - performing loan, the discount required by a private investor may exceed 40 % solely due to the cost, time and uncertainty of the recoveries ( see chart 8 ). 6 8 / 13 bis central bankers'speeches most of the factors contributing to the discount would not be recognised in banks ’ provisioning. under ias 39, the current accounting standard which is to be replaced by ifrs 9, provisions are made under the incurred loss approach. investors who have limited information would use a much higher discount rate ( corresponding to the green bars in chart 7 ) to reflect their uncertainty about the quality and thus the value of the loan. they would additionally account for the full expected cost of working out the loan ( blue bars ). this calculation produces a wide bid ask gap. structural reforms that would reduce all the impediments mentioned, would raise the net present value of the non - performing loans on bank balance sheets, thereby providing an important and welcome buffer to absorb further losses and increase the range of options available to resolve npls ( see chart 9 ). 9 / 13 bis central bankers'speeches it would not suffice, however, to develop and stimulate market - based solutions for the high stock of npls. some assets may still not attract