then came back down to 70 %. in spain, it progressively increased from 30 % to 130 %, and then stayed there. this underlines that within a monetary union, domestic conditions and domestic policy choices continue to matter, particularly when they relate to fostering productivity growth. conditions and choices which allowed ireland to grow out of its public debt problem. that ability to recover is also a key factor for resilience, which is so very vital when new financial stability risks are likely to materialise, and which is especially important for small, open economies. for tigers and lions who have to be prepared to survive desperate weather, a dirty looking sky or a great drying out. for tigers and lions who know that financial stability is an unstable asset. for tigers and lions who live every day with the truth of what rudiger dornbusch once said in reference to the tequila crisis in 3 / 4 bis - central bankers'speeches mexico " it took forever and then it took a night ". that is why tigers and lions prefer to live in a european and global habitat. because international cooperation, a global approach, is the best way to ensure financial stability, to counter external shocks, to be prepared for changing conditions. to cope with the economic weather. experience has taught us that global financial stability risks, like any global challenge, are best dealt with using a globally consistent approach. think of the response to the covid pandemic. that has shown us how coordinated, fast - paced and effective policy - makers can be when we face a common challenge. for example, the eu - wide loan repayment moratoria scheme made sure that the financial sector provided financial relief, and not financial distress, to households and businesses. the emergency liquidity made available by the ecb preserved smooth financing conditions and ensured that financial institutions in the euro area could continue to support the real economy. the suspension of dividend payments and the release of capital buffers across several countries made sure that banks had sufficient room to absorb losses. in short, international cooperation made sure that banks were not part of the problem, but a very valuable part of the solution. and, looking back at our financial trilemma : completing the banking union would take the financial trilemma to its logical conclusionyes, small, open economies, tigers and lions like ireland and the netherlands, benefit from international cooperation and from the ability to predict and adapt to risks. because we all know : when it comes to financial stability, nothing

basel ii has only been fully implemented in europe since the beginning of this year. the us is rolling it out more slowly. even so, there is already strong agreement that basel ii will improve incentives for risk management and market disclosure and enhance capital regulation and supervision. let me point out some key enhancements relevant to the current crisis. among other things, basel ii will deliver better risk differentiation. banks that enter upon more risky lending practices will need to strengthen their capital base accordingly. moreover, under the new capital regime all exposures will be subject to regulatory capital charges, whether on or off the balance sheet. basel ii will also create more neutral incentives between retaining exposures on the balance sheet and transferring them to the capital markets through securitisations. it will reinforce capital requirements for banks ’ trading books, which are rapidly growing. and last, basel ii will enhance disclosures of banks ’ risk profiles, notably with regard to structured credit and securitisation activities. given that basel ii is a risk - sensitive framework, there is some concern that it may turn out to be too procyclical. however, to achieve more risk sensitivity in minimum capital, there has to be some fluctuation in that requirement over the cycle. the basel committee has tried to balance the objectives of risk sensitivity and capital adequacy over the cycle. for instance, banks are required to perform forward - looking stress tests to make sure that they hold enough cushions above the minimum. basel ii will also require much stronger firm - wide aggregation and management of risk exposures. and banks that take on more risk will be required to hold more capital in the first place, helping to prevent the build - up and underpricing of risk. we will also be tracking the framework over time and make any necessary adjustments based on our findings. so, it is safe to say that the basel ii framework is a major improvement. but it is not the ultimate answer to the financial markets problems of today and tomorrow. in december 2006, the basel committee had already identified “ pressure points ” and weak spots in the regulatory and supervisory regime that should be addressed. fortunately, the framework is flexible enough to evolve over time. in light of recent developments, the basel committee has already begun to evaluate certain aspects of the framework. these include issues such as the securitisation of complex products, reputational risk and disclosure. but strong capital, though essential, is only one aspect of a stable banking and financial system. sound risk