to improve. in the second quarter of this year the flow of new non - performing loans fell to 2 per cent of total lending, a level consistent with the average observed in the years prior to the global financial crisis. the stock of non - performing loans is also decreasing rapidly : net of write - downs, in june it had fallen to €150 billion, equal to 8. 4 per cent of total loans, from the peak of €200 billion, or around 11 per cent of total loans, reached in 2015. the ratio of bad debts to total loans has declined from 4. 8 to 3. 9 per cent. over the next few months, disposals and securitizations already under way and those recently announced by a number of banks will further drive down the stock of npls, which, net of existing write - downs, should fall below 8 per cent of total loans in the early months of 2018. banks ’ balance sheets need to be further bolstered to make them better able to withstand, now and going forward, the risks still weighing on the economic outlook. banks are responding to this also by referring to the ecb ’ s ‘ guidance to banks on non - performing loans ’ issued in march 2017. the measures to reduce the burden of non - performing assets announced last july during the european council are a step in the right direction. this is also the aim of the introduction, which should be gradual and properly calibrated, of a calendar approach to write - downs for future non - performing loans. the reforms passed in italy in recent years have shortened the duration of credit recovery proceedings ; there is room for further action. the recent passage of the enabling law laying the ground for a comprehensive reform of legislation on corporate crises and insolvency proceedings will provide a major contribution to this. the principles and criteria set out in the enabling law must be implemented and translated into rules that can truly speed up credit recovery times, preserving as much as possible the value of companies that are still in sound condition. banks must make full use of the tools that have recently become available in the domain of out - of - court settlements with firms for the restructuring of debts and the transfer of assets. moreover, having suitable and timely data on npls is indispensable for more effective internal management and to facilitate their sale on the market at adequate values. despite the improvement observed following the survey we launched last year, banks still need to make progress in this area too. the

the financial system and economy. this has been accompanied by a fundamental review of governance arrangements and regulatory reforms at the international level. at the extreme, responses of central banks to the crises in the us and europe have ventured beyond conventional approaches. in the area of surveillance, existing monitoring frameworks have been extended to capture risks and vulnerabilities emerging from areas beyond the traditional perimeters of regulated financial institutions and markets. in this respect, effective coordination between the macroprudential and micro - prudential surveillance functions have become more important, given that supervisory interventions and crisis management measures are now being applied to a wider set of institutions and markets. the need for central banks to have a broad range of instruments, including macroprudential measures, to achieve financial stability policy objectives is now generally accepted. focus has also been on the efficacy of different policy instruments that are needed to preserve financial stability, the structure and design of decision making frameworks and the accountabilities in regard to financial stability. for asia, these considerations have been very much a part of the evolution of financial stability frameworks in the region in this recent decade, in particular following the asian financial crisis. by virtue of being also responsible for bank supervision, the majority of asian central banks have a clear mandate for financial stability, whether implied or explicit. in the case of malaysia, this has supported the close coordination of the macro and micro surveillance functions, and more comprehensive assessments and analyses of the interactions between monetary and financial stability policies. many central banks in the region also have considerable experience in implementing macroprudential measures, such as lending concentrations, loan - to - value limits and some form of “ dynamic ” reserving or provisioning policies. the intensification of regional monetary and financial cooperation among central banks in the asian region has also served to strengthen regional surveillance and crisis management arrangements, as well as in the supervision of financial institutions with cross - border operations in the region. as asia rises and expectations increase, the two billion asians now at the margins of the consumption economy will radically transform global demand and supply for limited bis central bankers ’ speeches resources. considerations of climate change, environmental damage and the depletion of natural resources have become a higher priority, and therefore needs to be also integrated with financial and economic policies, for example through the implementation of policies on sustainable financing. finally, given the higher degree of connectivity not only within the domestic financial system and economy, consistent policies and coordination becomes key. clarity on the governance