market liquidity for the euro area which is based on a methodology developed by the bank of england. the indicator relates to equity, bond and foreign exchange markets and aims to gauge three different dimensions of market liquidity : tightness, depth, and resiliency. this particular indicator confirms that financial market liquidity in the euro area increased gradually since the late 1990s, rose significantly during 2003, and since then markets have remained very liquid. this indicator will be presented in the forthcoming edition of the ecb ’ s financial stability review, which will be published by mid - june. this increase in market liquidity in recent years seems to reflect partly, if not mostly, structural changes, for example, the liberalisation of international flows of funds, the securitisation of loans, the development of new financial instruments, and the rapidly growing presence of highly active financial market participants in markets, such as hedge funds. however, ample market liquidity could also reflect the “ search for yield ” and excessive risk appetite, indicating that liquidity risk could be underpriced. if this is soothe case, the current favourable market liquidity conditions could suddenly fade away if there were an abrupt and lasting increase in risk aversion. this could expose several underlying vulnerabilities and result in funding liquidity challenges for highly leveraged institutions, unwinding of carry trades and increasing credit spreads across the credit quality spectrum. the triggers that could expose vulnerabilities in the financial system cannot be predicted with any degree of certainty. however, financial institutions can prepare to mitigate potential disturbances before they occur through appropriate risk management arrangements and by stress - testing. this is especially relevant today because the modern – developed and efficient – financial markets are – if i may employ a fitting image used before – like a highway ; they get you where you want to go faster and more efficiently. but accidents, if they occur, may be worse than before. for this reason, there is no room for complacency and we must be alert so as to look forward to a safe journey for the global financial markets and, more generally, the world economy. thank you very much for your attention.

it makes the rich richer! governments have to take care of redistributive effects. how important is confidence in the private sector? it is extremely important. the biggest risk now is that after years of lower inflation expectations and lower real growth there is a risk of an entrenched pessimism that might become self - fulfilling, delaying expenditure and investment, which in turn leads to underemployment and lower potential growth. what would you expect the main impact of qe to be in portugal? the portfolio rebalancing effect will be quite significant. there will also be a steep drop in the lending rates that banks apply to households and firms in portugal. we saw this happening even before the start of the programme. there is a discussion going on about the fiscal impacts of the operation in portugal, both as a result of lower interest rates in the market and owing to the fact that the interest paid to the central bank will be given back in part to the government. and this depends a lot on how much you buy. yes, but you have to look to all of the consequences for the economy, not only the consequences for the interest rates. the impact on debt is just part of it. you have decided that around 90 % of the risk in sovereign bonds will be national, and 10 % will stay with the eurosystem. however, profits are supposed to be shared. to be precise, considering all the additional purchases, sovereign and european institutions bonds around 20 % of the risk will be shared, and 80 % will be borne by the national central banks. the legal acts have not yet been published. several options were considered, but for the part of the overall portfolio that is not shared, the governing council intention is to have the same approach applied to both the profits and the losses. what is your evaluation of the current economic situation in portugal? we have seen an improvement almost everywhere, including portugal, which will also benefit from the reforms undertaken, the fall in the oil price and better financial conditions. the question mark hangs over what we call “ reform fatigue ”, whereby, for example, some reforms have been suspended in recent months. there is a risk that novo banco will be sold below the value of the recapitalisation. is this a problem from your perspective? it is premature to say anything on this. your sustainability analyses imply levels of growth and primary balances in the next 10 to 20 years hard to achieve. how worried are you about the sustainability