of the crisis. for example, one significant factor is the tax changes in germany : they had a significant impact on euro area inflation of around 0. 6 percentage points, but the effect will drop out of the calculation in the early part of next year. 1 / 3 bis - central bankers'speeches in all likelihood it will be a similar case with oil prices : after sharp rises over the last year, in recent weeks they have shown signs of easing. other factors, most notably the logjams in logistics and global supply chains are currently thought to be mostly temporary in nature, although they will continue to drive inflation for at least several more quarters. they might also have a longerterm impact on inflation, particularly if they lead to the shortening of production chains or the migration of production to closer locations that are less favourable in price terms. the rise in inflation is therefore not unexpected, but it has been more pronounced and more sustained than was anticipated at the beginning of the reversal. the key to future developments is what happens in two areas : the first is the expectations of firms and financial markets. the second, a related area, is the labour market, and the passthrough of higher prices into wage demands. these two factors could lead to inflation remaining above 2 %, its core target level, for a sustained period. my message is the following : if the developments and projections indicate that higher inflation could become more persistent, we have sufficient instruments at our disposal to adequately address the inflationary pressures. the first monetary policy decisions will be taken soon, in mid - december, when we decide whether to end the pandemic emergency purchase programme, and whether to potentially make changes to the app, i. e. our ordinary asset purchases, and also decide on the fate of the targeted longer - term refinancing operations ( tltro iii ). here it is vital that the measures are designed to grant sufficient flexibility if the situation does not unfold in line with the core scenario. we must therefore ensure sufficient manoeuvring room in the event of a further deterioration in the pandemic, and thus in the economic situation, and also in the event of inflationary pressures lasting longer than anticipated and inflation being more sustained than expected. to close, allow me to touch on the banking system. the slovenian banking system as a whole and the individual banks have survived the crisis to date without major upheaval. the key performance indicators have remained stable, and the changes in

central bankers'speeches to mention just a few parameters : common equity tier 1 ratio of significant institutions rose from close to 13 % in 2015 to almost 16 % today. aggregate liquidity coverage ratio is now further above the regulatory minimum. quality of banks'assets has also improved significantly with the share of nonperforming loans of si's somewhat above 2 %, well below 7 % observed in 2015. at the same time, i am well aware that other policy measures have also contributed to banks'resilience. european banking sector has also indirectly benefited from strong policy support, which has helped shield the real economy from adverse shocks and more directly, sequencing of our monetary policy measures has impacted banks balance sheets in a substantive way as well. against such backdrop, our attention has shifted towards medium - term challenges. and i would like to highlight three areas, which are of particular importance. the first one to mention – and not necessarily the priority one – is related to the architecture of the eu and euro area. the ssm was established on the premises of a broader institutional framework, which is the economic and monetary union complemented by a three - pillar banking union as well as capital markets union. while much has been achieved on the first two pillars, the third pillar and with it the whole banking union remain incomplete. at the same time, progress is needed on capital markets union. the past decade was a decade of intense discussions and while several attempts were made to implement it, unfortunately, we have not progress beyond discussions and attempts. the second challenge i would like to mention is related to fast - changing environment the banks are operating in. digitalization of society in the last decade has been astonishing. and more recently, ai technologies are rapidly evolving their applications and gaining users. it is not just banks that must adapt to a speedily digitalizing society, including financial sector supervision and supervisors need to evolve as well. we must ensure we are equipped with the right tools and skills for the future. the third topic which demands our increased attention is climate risk. what is astonishing is a rapid change in the tone of the debate in the past decade. if we were faced with a lot of skepticism in the early days, the debate has now almost completely changed – from analysis of the problem to discussion of the solutions. the hard work of the ecb, ssm and the ncas in this area is widely recognized and i can proudly say that banka slovenije is also participating to the best of