in may 2010. tensions spilled over into market segments other than government bonds. not surprisingly, the credit risk of the eu banking system mounted to levels higher than those observed after the collapse of lehman brothers ( see chart 4 ). by the same token, the probability of a simultaneous default of two or more large and complex euro area banking groups, as measured by the indicator of systemic risk reported in chart 5, rose sharply on 7 may. money market volatility also surged ( see chart 6 ) : implied volatility on three - month interest rate futures went up in early may for contracts expiring six months ( second contract ) and 12 months ( fourth contract ) ahead. regarding the foreign exchange markets, between mid - february and 7 may, the euro depreciated by 7 % against the dollar, from usd 1. 36 to 1. 27 per euro. shorting the euro became the proxy speculative position for selling greek and other “ peripheral ” debt. in early may the net short speculative ( non - commercial ) position against the euro reached a record 114, 000 contracts, equivalent to about €14 billion ( see chart 7 ). the turmoil had an impact on equity markets as well : between mid - february and 7 may, the euro area stock market declined by more than 7 % ( and by 15. 5 % from april 15 to may 7! ). even more worrisome, in may equity indices decreased worldwide ( see chart 8 ). in may and june the average pair - wise realised correlation between s & p500 stocks went up more than it did after the lehman bankruptcy. loosely speaking, this indicates that concerns about macroeconomic developments had inhibited investors from differentiating between different stocks, and panic was mounting ( see chart 9 ). stock markets also became more volatile, as reflected by the increase in the implied volatility of the eurostoxx50 and s & p500 indices, albeit at levels lower than those observed towards the end of 2008 ( see chart 10 ). the longterm implied volatility of the us stock market also surged ( see chart 11 ). finally, indicators of investors ’ sentiment, as measured by the difference between equity put and call options implied volatilities, went up in may ( see charts 12, 13, and 14 ). all in all, on the eve of the first week - end of may the global financial system was on the verge of a meltdown similar to, if not worse than, the

2015, following the full - 2014 trading volume of php4. 40 trillion. to where we need to go our numbers will be rather modest by global standards but it cannot be denied that we have indeed come far in the last 15 years. for that, allow me to congratulate all the stakeholders of the philippine capital market. with the applause, one can almost hear people murmur, so let me say it aloud. yes, ladies and gentlemen, there is a “ but ”. we have come this far but there is much that still lies ahead. our rapidly growing economy needs a deep and active domestic debt market more than ever, both to provide the more stable funding for infrastructure and other long - term needs as bis central bankers ’ speeches well as the investment outlets of a quality and variety that meet the diverse requirements of our savers. but it will not come about of its own without our active collaboration to build a market that inspires trust and confidence. it requires the cooperation and commitment of government as major issuer, of the financial regulators, of the tax authority, and you, the market players. together we must build a public good that advances the welfare of all. at the very core, we need to maintain transparency and adhere to strong standards of governance. we desire prices to be efficiently discovered. as a market, we have experienced the dangers of purely bilateral trades, uncontrolled leverage and inefficient settlement. we need a yield curve that reflects active trade across a broad range of activities to serve as the sensitive and critical reference point to properly price risk and guide the market through changing conditions. we need competent and responsible market intermediaries and reliable and robust infrastructure that can provide the desired efficient access to the markets from wherever they are in our archipelago. changing market incentives ladies and gentlemen, the issues i just raised comprise a long enough list, but as you know, they are not exactly new either. with all the challenges, we remain a bank - based financial market. i believe however that three developments are pushing the pace of real reforms in our capital market. first, banks today face a “ new normal ” - one that demands a “ fresh perspective on risk ”. necessarily, this means banks must define a new strategic path moving forward. although capital adequacy ratios have been kept above the regulatory minimum, capital is as much a scarce resource as any. in this sense, banks may be very liquid but they cannot and should not chase every credit option that