chapter 12, pp. 601 – 650. see beck, r., p. jakubik and a. piloiu, “ non - performing loans : what matters in addition to the economic cycle? ” ecb working paper, no. 1515, february 2013. see borio, c. and h. zhu, “ capital regulation, risk - taking and monetary policy : a missing link in the transmission mechanism? ”, journal of financial stability, vol. 8, 2012, pp. 238 – 251, and caballero r., hoshi t. and a. kashyap, “ zombie lending and depressed restructuring in japan, ” american economic review, vol. 98, 2008, pp. 1943 – 77. see rajan r., “ has financial development made the world riskier? ”, european financial management, 12 ( 4 ), 2006, pp. 499 – 533. bis central bankers ’ speeches lower bank lending standards and with a shift of credit towards borrowers with a lower credit quality. 21 additionally, the latest ecb survey on the access to finance of enterprises in the euro area ( safe ) shows an improvement in the availability of bank loans for smes between october 2014 ( shortly after negative rates were introduced ) and march 2016. 22 this could indicate that one way that banks are taking on more risk is by lending more to smaller, and typically riskier, firms. of course, promoting lending, including to risky borrowers, is one of the goals of accommodative monetary policy. but the main question, however, is whether negative rates can also lead to excessive risktaking by banks. if accommodative monetary policy works as intended, then more investment projects will gain a positive net present value and will be financed – including some riskier ones. that ’ s the “ good ” risk - taking. however, banks may be tempted to finance risky but negative net present value loans – that is excessive or “ bad ” risk - taking. the theory suggests that this possibility is more likely when interest rates are low, if banks are highly leveraged or if they can easily adjust their capital structure. 23 empirical evidence while theoretically appealing, a precise estimate of the point where accommodative monetary policy becomes contractionary and / or an issue for financial stability is extremely challenging. what i can offer you today is an overview of the situation of financial intermediaries in the euro area, in order

have become increasingly important. although currently profitable and well capitalised, many banks will experience income and credit losses, which may trigger a re - assessment by some of them of the suitability of this socalled “ originate - and - distribute ” business model. with regard to hedge funds, they have not been at the centre of the turmoil. an important lesson in this regard is that many funds with solid financing structures and / or strategies geared towards distressed asset management are likely to have prospered from recent events, thereby smoothening volatility and mitigating the effects of a financial de - leveraging process. finally, certain supervisory and regulatory issues can already be identified as warranting further attention or action. initiatives are already underway at the european and international level to draw lessons and consider further policy actions. whilst it is still too early to draw definitive conclusions, there is a common understanding on the need for finding solutions that can be applied consistently at the global level. in this respect, international coordination is of the utmost importance, as any policy action should be applied consistently, thus ensuring a level playing field globally. turning to possible lessons from a regulatory and supervisory viewpoint, i would stress first of all the importance of effective implementation of basel ii which, despite the possible need for some revisions in light of the recent financial market developments, provides a sound basis for banking supervision and incentives for improvements in banks ’ risk management. second, i would mention three key areas that warrant further attention on the part of the international community. first, banks need to further improve their risk management, in particular liquidity risk management. the complexity of structured finance products calls for banks to have in place commensurately sophisticated risk management systems, including liquidity risk stress - testing. second, the role rating agencies played in the recent events needs to be assessed. in particular, a better insight is needed into the incentive structures, including possible conflicts of interest, to perform proper due diligence. at the same time, the possible lack of incentives for investors to carry out their own credit analysis and due diligence should also be taken into account. third, certain areas of the regulatory framework may need to be reviewed, such as the treatment of liquidity risk and the securitisation framework, in particular the treatment of liquidity exposures to special purpose vehicles and the assessment of risk transfer, given their significance in the recent financial turbulences. let me conclude by stressing that i am confident that from this process,