framework vindicate the scope and magnitude of the regulatory measures, it should not mask the challenges that are associated with the implementation of the reform package. indeed, basel iii will have some potential transitional costs that arise as banks, on average, need to increase their capital base in order to fulfil the new requirements. while the basic assumptions on the m - m theorem may hold in the long term, financial markets are characterised by information asymmetries and frictions in the short run, which can be especially prevalent in distressed periods. bis central bankers ’ speeches banks have several possibilities to adjust their capital ratios. for instance, they can raise capital, increase lending spreads, reduce dividends and / or downsize ( risk - weighted ) assets. in practice, it is likely that banks ’ adjustment is going to be achieved through a combination of all these measures. there is empirical evidence, however, that in the short term and in crisis periods in particular, banks react to capital ( and liquidity ) constraints by de - leveraging and by tightening of credit conditions ( hempell – kok, 2010 ) that can have a measurable impact on loan supply and thus on economic activity ( de bondt et al. 2010 ). whatever methods banks choose to adjust their capital ratios, the overall effect is channelled to the macro - economy via various transmission channels. the macroeconomic assessment group analysed transitional costs related to a 1 percentage point increase in the capital ratio implemented over eight years, assuming a constant return on equity. the results of the study show that the transitional costs are subdued. the cumulated reduction of gdp relative to the baseline would amount to 0. 15 percentage points. similarly, the negative [ un - weighted median ] impact on bank lending to the real economy would be approximately 1. 4 % in cumulated terms. the lending rate spreads are estimated to increase by 15. 5 basis points. the peak impact would occur after 35 quarters from the beginning of implementation period but the negative impact recedes when the time elapses. the interim report of the macroeconomic assessment group assessed also the implications of new tighter liquidity requirements. a 25 % increase in the holding of liquid assets was estimated to yield a fall in lending volumes of 3. 2 % and a [ median ] increase in lending spreads of 14 basis points after four and a half years. this would induce a [ median ] decline in gdp of 0. 08 % relative to the baseline. however, as the new liquid

banks. we should not overlook the fact that competition authorities have already provided some guidance in this context, although i am aware that it does not satisfy many banks. nevertheless, the agreement between visa europe and the european commission, which was announced last week, has brought some further clarity to the area of card payments. 2 naturally, the most obvious component of a financing model are visa europe has proposed to reduce to 0. 20 % the maximum weighted average mif for all cross - border transactions and for national transactions in a number of member states using debit cards. it also proposes to revenues. however, a financing model is not necessarily restricted to the costs and revenues linked to card payments. it may be worth analysing possible effects on other areas of business too. the reduction in cash handling costs could, for example, form an integral part of the business case when banks evaluate their involvement in one of the initiatives for a european card scheme. i admit that this is far from being an easy task, however, no one ever said that it would be easy to achieve a goal as challenging as the creation of an additional european card scheme. now all parties involved in the various initiatives need to prove their commitment and determination. therefore, i appreciate the fact that monnet seems to be making great strides and i am looking forward to learning about the next concrete steps and milestones of the project. conclusion i started with the council of europe and its important contribution to the european identity with the flag of europe and the european anthem. as you know, the anthem is based on ludwig van beethoven ’ s “ ode to joy ” from his symphony no 9. this is the final symphony that he completed and it is generally considered to be his masterpiece. when it was first performed on 7 may 1824 in vienna it received five standing ovations. even though the completion of sepa is extremely unlikely to receive such enthusiastic applause from the european public, it would be a great achievement with real benefits. but without an additional european card scheme, sepa will remain an unfinished symphony. maintain and further develop measures which will increase transparency and competition in the payment cards market. this was welcomed by european competition commissioner joaquin almunia ( see : http : / / europa. eu / rapid / pressreleasesaction. do? reference = ip / 10 / 462 ).