the large exposure limits for private - sector borrowers. that way, even if these borrowers were to default, banks would still have enough capital at their disposal. if the preferential regulatory treatment of sovereign debt were done away with, this would also increase investors ’ incentives to take greater account of the differing risk profiles of the individual states, which in turn would thus strengthen the disciplinary function of capital markets. countries that pursue unsustainable policies would then face rising risk premiums. where political action needs to be taken is known – however, the eu now needs to demonstrate that it is, in fact, willing to act. there is a similar political constellation regarding the topic of deposit protection. under the european commission ’ s current proposal, existing national protection schemes – which are already operating under standards which have been harmonised across europe – will gradually be replaced by a european deposit protection scheme. although we have a single supervisory mechanism in europe under which banks are supervised according to uniform european guidelines and harmonised rules, as well as a single resolution mechanism to go with it, the financial situation of the supervised institutions hinges on the state of the economy, as well as, of course, the legal framework of the affected country. insolvency, for instance, is still governed by a patchwork of very different national regimes. rushing all too madly to introduce a european deposit insurance scheme would not only create an unfair situation in which some banks would be more likely to dig quite deeply into the shared pot ; it would also tend to reduce the pressure on member states to conduct reforms. let me once again reiterate the guiding theme of my foregoing remarks : there is an in - built conflict between short - term relief and the balance between actions and responsibility for their consequences, and thus also the basis for a rules - based order that can function in the long run. it is not only at the eu level but also, and in particular, member states where unpleasant structural reforms have to be undertaken in order to make the eu less vulnerable to crises. time is of the essence and, given the challenges we are facing in the eu, should not be wasted. 4. conclusion ladies and gentlemen, at this hour, the uk ’ s future in the eu is balanced on a knife edge. we won ’ t have to wait longer than tomorrow to learn how the uk has voted : whether it wishes to remain a member bis central bankers ’ speeches of the eu or to leave. however, we should not worry

of the bank of uganda intervention into the uganda commercial bank through the sale of its assets to stanbic bank further strengthened the financial sector. stanbic has not only retained all the branches of ucb, it has improved service quality, outreach and efficiency. they have also successfully introduced automatic teller machines throughout their branch network which has substantially increased convenience and reduced transactions costs. as a result of these reforms, public confidence in the financial sector has greatly improved. over a period of the last ten years, the banking sector has registered a tremendous increase of shs. 2, 591. 2bn. in total assets from shs. 723. 7bn. in 1995 to shs. 3, 315. 0bn. in 2004. total deposits grew by shs. 2, 052. 9bn. from shs. 383. 0bn. to shs. 2, 435. 9bn. during the same period while total loans went up by shs. 673. 2bn. from shs. 303. 5bn. to shs. 976. 7bn. over the period 1988 to 2004, non - banking financial institutions recorded growth of assets amounting to shs. 139. 02bn. from shs. 56. 78bn. to shs. 195. 79bn. deposit liabilities grew by shs. 94. 46bn. from shs. 17. 89bn. to shs. 112. 35bn. the loan portfolio grew by shs. 72. 245bn. from shs. 18. 99bn. to shs. 91. 24bn. over the same period. overall, the asset quality and profitability of the commercial banks have substantially improved, although it is troubling to see that banks ’ balance sheets still reflect a strong preference for liquid and low - risk assets, and the margin between interest rates paid on deposits and lending rates is still unconscionably high. the quality of the bank ’ s risk portfolio has improved tremendously with non - performing assets ratio falling from 29 % of the portfolio in 1998 to 2. 6 % in september 2004. however, the maturity structure of loans, and the degree of concentration need to be reviewed. on the maturity structure only 12 % of all loans, 35 % of loan volume, 17 % of total deposits and less than 0. 5 % of time deposits have a maturity structure of more than one year. there is also a high degree of