##bank money markets. over time, and once they have been fully implemented, these measures should improve the functioning of the term money markets and the access of banks to wholesale funding markets. this should lower the cost of bank funding and facilitate the provision of credit to the economy. that said, in order to revive the process of efficient financial intermediation, financial institutions will need to play their part in the adjustment process by taking advantage of these measures to effectively recapitalise and repair their balance sheets. iv. overall assessment let me conclude with our overall assessment of financial stability at the current juncture : the euro area financial system has undergone a further significant test of its shock - absorbing capacity since the finalisation of the june 2008 financial stability review. at the same time, there are a number of risks and vulnerabilities lying ahead with which the financial system may have to cope, notably the possibility of : • a further deterioration in the us and the euro area housing markets and the impact this may have on banks ’ loan quality and the value of securities backed by mortgage - related assets ; • a deeper and more prolonged slowdown in both the global and the euro area economy than currently expected that could cause a sharper and broader deterioration in borrowers ’ ability to service their debt ; • a more pronounced de - leveraging by banks, due to persistently high funding costs and concerns about the adequacy of capital buffers, which could negatively affect the flow of credit extended to the broader economy ; and • an increase in financial market volatility caused by a further unwinding of positions by hedge funds. all in all, given the risks that lie ahead, banks will need to be especially watchful in ensuring that they have adequate capital and liquidity buffers in place to cushion the challenges ahead. thank you very much for your attention. i am now at your disposal for questions.

asset quality and the adequacy of the capital buffers of some euro area institutions and resulted in an abrupt and significant deterioration in money market conditions. consequently, government and central bank actions were necessary to help stabilise the banking system. since september this year, tensions have increasingly spilled over from the financial sector to the real economy. in the euro area, a number of the downside risks to economic activity that had been previously identified materialised. the significant weakening of economic activity could have a negative effect on borrowers ’ ability to service their debt and thus on the credit risk faced by banks. according to the december 2008 eurosystem staff macroeconomic projections for the euro area, global economic weakness will persist in the coming quarters ; thereafter we expect a gradual recovery, supported by the fall in commodity prices and assuming that the external environment improves and the financial tensions weaken ( see chart 3 ). losses related to banks ’ operating activities are not included, to the extent that investments in related assets can be segregated from operating losses. if a bank ’ s core business involves mortgage - loan origination, securitisation, or otherwise requires the firm to hold related assets, these losses are included. losses from investments in all other banks or firms are included only if the firms or banks in question are not included in the data used to compute these figures, or if the loss affects cash flows, as in the case of fixed income securities. figures are pre - tax and net of any relevant financial hedges and off - setting gains, unless a bank does not report these factors. most recorded losses are the quarterly or accumulated losses that were reported at quarter - end. one important exception is when the company reports provisions for credit losses and charge - offs. in this case, the year - over - year increase in provisions or charge - offs are used instead, in order to minimise the impact of normal operations on the figures. unless it is certain that loan charge - offs are not included in new provisions for losses, these charge - offs are only recorded for 2007. the underlying assumption is that charge - offs after the end of 2007 are already included in previously recorded provisions. some banks do not expect to fully realise these write - downs, especially in the case of unrealised losses, mark - to - market losses, and loss provisions. inclusion in the figures is not meant to imply that the firm has already incurred such losses, and any reversals or realised gains are included to mitigate the effects on