current levels. positive developments also occurred in terms of the external debt, whose share in gdp decreased by more than 12 percentage points since 2012, mainly due to the cross - border deleveraging and the near complete repayment of the imf loan. nevertheless, international reserves, which currently stand at eur 33. 8 bn, continue to provide comfortable coverage as measured by most available metrics ( above 6 months of prospective imports, around 100 percent of the short - term external debt at residual maturity, almost 60 percent of the money supply ). while romania seems to have wrapped up the period of macroeconomic adjustments, the future mission of economic policies is to keep the economy on an upward trend without putting at risk the balances restored with so many efforts. as in many other european countries, the emphasis now falls on structural reforms meant to boost the economy ’ s growth potential in the long run, enhancing its flexibility and resilience to shocks. as a central banker, i am perfectly aware that one cannot talk about a sound economy and sustainable economic growth without a solid financial system. speaking about the banking system, the soundness of which has been entrusted to the central bank, i would first say that it has successfully weathered the crisis, without any resort to public money. not only is the system well - capitalised, as shown by the 18. 6 percent total capital ratio in march 2015, but good - quality capital prevails, given that the tier 1 capital ratio stands at 16. 1 percent. both bis central bankers ’ speeches levels comfortably meet the new basle iii capital requirements. moreover, banks made real progress in cleaning up their balance sheets over the last year, bringing the aggregate npl ratio down from levels above 20 percent in 2014 q1 to around 13 percent currently. as elsewhere in central and eastern europe, in romania too the vulnerabilities exposed by the crisis in the model of centralised fund management at the level of cross - border banking groups led to a new paradigm, which emphasises the local funding of credit activities. the cross - border deleveraging which accompanied this switch, while sizeable, has nevertheless unfolded in an orderly manner. the shift towards the domestic market in terms of financing sources was accompanied by an increase in the relative importance of local currency - denominated loans : after a long time, their share exceeded 45 percent and will possibly overtake foreign currency lending by the end of the year. this is, undoubtedly, a positive development for both debt

##ors, who avoid currency risk exposure, and central banks, due to the increased effectiveness of monetary policy. looking ahead, the constraints on both credit supply and demand are expected to continue to prevail, as the effects of a balance - sheet crisis, such as the one we have recently encountered, tend to be longer - lasting. in such an environment, the quality of credit allocation appears more important than the volume, although the latter is not at all irrelevant in our case given a still low financial intermediation at 31. 7 percent of gdp ( not even during the credit boom period did it exceed 40 percent ). in order to put the economy onto a self - sustained growth path, i believe it is necessary for banks to channel credit to productive investment, avoiding the overburdening of good debtors with the costs of past misallocations. such an approach should generate the productivity gains that are essential for credit, investment and productivity to fuel each other and place the economy onto a sustainable uptrend. let me now turn to monetary policy. the countercyclical stance during the boom years allowed monetary policy to turn stimulative after the outbreak of the global crisis : the policy rate has been gradually cut from 10. 25 percent at the beginning of 2009 to 1. 75 percent currently, while the reserve requirement ratios have been lowered to 8 and 14 percent for leiand forex - denominated liabilities respectively. while it is obvious that the nbr did not have to navigate in the uncharted waters of quantitative easing and negative nominal interest rates, there are still challenges to cope with. i would list first the difficulty in designing monetary policy in a context of rapidly improving cyclical position of the economy, while a perfect storm of favourable supply - side shocks – namely oil and food price drops and indirect tax cuts – has been generating low inflation readings for quite a while now, with the potential to alter inflation expectations in the medium term. furthermore, the already mentioned constraints on credit supply and demand still impair the transmission mechanism of the monetary policy. specifically, even though the interest rates on new loans in domestic currency have declined further in response to the policy rate cuts, the annual growth of credit to the private sector has leveled off in recent months. aligning the operational framework of monetary policy to european standards is another challenging objective the central bank faces. obviously, i am talking about the still high reserve requirement ratios ( given the need to contain credit expansion, foreign currency