no longer allowed the ecb, under its rules, to waive its minimum credit requirements and accept greek governmentlinked securities as collateral in its monetary policy operations. nevertheless, the eurosystem provided all the liquidity necessary for the greek economy to function, with adequate safeguards against monetary financing of the government. as a result, central bank funding rose from €56 billion to over €125 billion, more than two - thirds of greece ’ s gross domestic product, demonstrating our commitment to the greek economy. by the end of june, uncertainty and concerns about the economic policies of the government were mounting, culminating in the announcement of the referendum on 5 july 2016. the introduction of bank holidays and capital controls in late june had eased immediate liquidity pressures, but further impaired economic activity. 1 / 4 bis central bankers'speeches in such an environment, once the third programme had been agreed by the greek authorities and their euro area partners, one of the immediate priorities was to regain depositor and market confidence in the greek banking system. to this end, a comprehensive assessment was conducted of the four significant greek banks between august and october 2015 by the supervisory arm of the ecb. it was followed by a successful recapitalisation exercise. the identified capital shortfall was largely covered by private funds, while the reliance on public funds was limited to €4. 5 billion. measuring progress so far the conclusion of the programme negotiations and the successful recapitalisation of the banking system led to a stabilisation of economic conditions. real gdp in 2015 turned out to be only slightly negative, but more than one percentage point better than expected after the imposition of capital controls. the stabilisation of output was supported by the resilience of private consumption, positive net exports and an acceleration of public investment at the end of the year. the achievement of the primary budget balance target for end - 2015 was supported by a series of important policy actions, especially on the revenue side. supporting and at the same time benefiting from the macroeconomic stabilisation, the situation in the greek banking sector has also gradually improved during the first year of the programme, although it has not yet regained the ground lost in the first half of 2015. following the recapitalisation in october 2015, the aggregated cet1 ratio for the four significant greek institutions increased from 11. 2 % in september 2015 to 17. 9 % in june 2016. while the ratios may appear high compared with the european banking sector

the effort in conducting this exercise. all these statements are mere speculation. the comprehensive assessment is an extraordinary opportunity to rebuild confidence in the banking sector and promote the long overdue repair of bank balance sheets, which in turn is a precondition for a sustainable economic recovery. one particular point needs to be stressed : credible national backstops must be put in place. if not, the credibility of the whole exercise is put at risk as the outcome will then almost certainly be negatively perceived by market participants. doing this balance sheet assessment without a backstop in place would be a bit like getting on a boat in rough weather conditions, and not taking a life jacket on board. any recapitalisation needs uncovered by the exercise should of course first and foremost be covered by the market. national budgets and national resolution funds may intervene as a second line. finally, a european backstop, the esm with its existing instruments, meaning a banking sector programme like in the case of spain, may be available. the second key element of a banking union is the single resolution mechanism, a european equivalent to the federal deposit insurance corporation. the crisis has shown that simple coordination among member states has been inadequate to organise the resolution of crossborder banks in an efficient, quick and least - cost manner. the single resolution mechanism contains three essential elements : first, a single regulatory framework. this will be established with the bank recovery and resolution directive ( brrd ). the trilogue of the council, the european parliament and the commission is currently ongoing and from an ecb perspective a desirable trilogue outcome would contain two elements. first, bringing forward bail - in to 2015 as markets will anticipate bail - in anyhow. having the rules in place earlier will give investors ’ bigger security. second, the flexibility and scope for national solutions should be somewhat reduced so that market participants will have sufficient confidence about the rules of the game in europe. the second element of the single resolution mechanism is the single resolution authority and the third, a single resolution fund, funded by contributions from the financial industry. the last two elements are currently in the legislative process and we strongly support the envisaged timeline for their entering into force ( 1 january 2015 ), as it ensures that the establishment of the single resolution mechanism would follow shortly after the effective start of the single supervisory mechanism. private banking union the “ private banking union ” in the us is created by its integrated financial market, which includes both the banking sector and capital markets. in the