part of that, the ssm is working to take stock of supervisory best practices. more action is needed to address shortcomings in insolvency, collateral and taxation frameworks. accounting standards are also important to address the issue. in the us, accounting standards require us banks to reduce, after six months, their npes to the market value of their collateral, if any. balance sheets are therefore cleaned up of bad loans rather swiftly. this illustrates how accounting standards interact with supervisory concerns. until now, the incurred loss model has been applied under ifrs which does not impose a timely treatment of npes by the banks. as a consequence, npes accumulate in banks ’ balance sheets, consuming capital and not contributing to banks ’ profitability. the introduction of ifrs 9 as from 2018 will change this situation. the ecb has already publicly expressed its support for a swift endorsement of ifrs 9. in our view, the new requirements for the classification, measurement and impairment of financial instruments, as well as the new general hedge accounting model, constitute an improvement over the previous requirements in ias 39. moreover, we believe that some aspects of the non - performing exposures ( npes ) can be defined as impaired exposures and past due ( > 90 days ) exposures. the ratio of non - performing loans refers to the ratio of non - performing loans to total gross loans. bis central bankers ’ speeches new standard may be an improvement from a financial stability perspective. the merits of the new expected credit loss model will clearly depend on its proper and consistent implementation in the financial sector. in this perspective, it is important that more granular instructions are given by the standard - setters and regulatory authorities in order to ensure that the implementation of the new standard is not subject to different interpretations that would not respect a proper level playing field. at the same time, it will be crucial to monitor the application of ifrs 9 in order to ensure that there are no unintended cyclical consequences of its implementation. in the us, the fasb just announced the approval of similar standards that nevertheless will only start to be applied in 2020. us banks have been critical of what will be a major change in frontloading provisions for credit risk. the introduction of both new standards will be a substantial change that will affect banks, already subject to more demanding regulation to which new features will continue to be added until year - end, albeit with the promise of not leading to a “ significant increase in capital

mr duisenberg explains the thinking of the european central bank on the issue of whether markets need guidance introductory statement delivered by dr willem f duisenberg, president of the european central bank, at the frankfurt european banking congress session i : “ do markets need guidance? ” held in frankfurt on 19 november 1999. * * * thank you very much for giving me the opportunity to explain the thinking of the european central bank ( ecb ) on this important issue. let me start by summarising my answer to your question : yes, the markets need guidance from the ecb. this guidance should mainly focus on reducing uncertainty in the markets. this requires above all a clear and credible commitment on the part of the ecb and sound economic analysis. thus, guidance should be given through a credible monetary policy strategy and a transparent ongoing assessment of euro area developments in line with this strategy. reducing uncertainty also implies that in our communication we do not pretend that we know more than we really do. obviously, our knowledge of the future course of the euro area economy will always be subject to uncertainties and limitations. it thus goes without saying that guidance certainly cannot be given in such a way that the ecb indicates a path for future ecb interest rates far in advance. this leads me directly to the second part of your question. ( “ is any particular mode of guidance preferable? ” ) how should the ecb give guidance to the markets? at the heart of the answer to this question is the eurosystem ’ s monetary policy strategy. indeed, this strategy is designed to make both our objective and the monetary policy aimed at achieving this objective credible, transparent and comprehensible, and thus make our decisions predictable. however, let me be very clear. being predictable in no way implies that the central bank intends to follow the market. on the contrary, the causality should run in the other direction. markets should be in a position to anticipate monetary policy decisions based on a credible strategy of the central bank. this does not exclude that certain monetary policy decisions may sometimes surprise the markets, but this is not our aim. as was argued in an article in the most recent issue of the ecb monthly bulletin, a stability - oriented monetary policy contributes to reducing certain risk premia in interest rates and thereby to increasing the efficiency of the allocation of capital, thus enhancing overall welfare. this shows that it is very important to give clear guidance to the markets by conducting a credible monetary policy focused on