by effective cross - border supervisory and regulatory institutions. a third argument is that banking union membership should benefit participating countries through the removal of an incentive for deleveraging on the part of banks with foreign capital. the on - going cross - border deleveraging process, while reflecting balance sheet repair in host countries, as well as constrained demand for new borrowing, must be monitored carefully. to give you an idea of the size of the phenomenon, as compared to the beginning of the crisis, external funding from parent banks has decreased in romania by 35 percent, about half of the reduction occurring last year. the rebalancing of bank funding away from parent - subsidiary lines of credit and more towards domestic funding is necessary and appropriate ( inter alia, it reduces loan - to - deposit ratios and the stock of foreign private indebtedness, both processes impacting financial stability favourably ), but must not be unduly accelerated in the short and medium term, especially when superimposed on an on - going fiscal consolidation effort, as this puts excessive downward pressure on economic growth. as a fourth argument for banking union membership, there are also potential benefits which relate to eliminating the possibilities of jurisdictional arbitrage ( for example, by preventing the widespread potential conversion of foreign - owned bank subsidiaries into branches ), as well as to creating a more competitive market by reducing distortions and entry barriers. there is a lot of potential for increased efficiency of the banking sector by virtue of being a member of the banking union. a more efficient banking sector cannot but bolster the long - run growth potential of an economy. a single supervisor with a single rulebook entails that supervisory and regulatory activities should be implemented in a harmonized and consistent manner, therefore lowering or eliminating the current cost of compliance for banks with cross - border operations. bis central bankers ’ speeches currently, there are widespread differences in terms of the interpretation and application of regulatory and prudential definitions across member states, and especially in what concerns supervisory forbearance. in terms of the latter, the national bank of romania has chosen a very transparent and tough approach, with the result that non - performing loans indicators have soared. at the moment, the non - performing loan ratio calculated based on prudential regulations stands above 22 percent. however, considering the new indicator on asset quality defined by the european banking authority, which covers both government and non - government exposures, the ratio declines to around 17 percent and is seen falling even further

second, repairing and restructuring the financial sectors to put them on a healthier footing ; third, regaining competitiveness by pursuing structural reforms. when giving advice as part of the troika, we always attached importance to ensuring social fairness. this meant, in particular, an equitable sharing of the adjustment burden across society and overcoming powerful vested interests. i am acutely aware of the social hardship in the programme countries. many citizens have suffered and are still suffering from policy mistakes in the run - up to the crisis and the subsequently unavoidable adjustment process. these are real people losing their jobs. real people getting their wages or pensions cut. this concerns all of us. but we should not jump to the wrong conclusions and blame the fire brigade for the fire damage. let us always keep in mind what would have been the alternative. a disorderly default would have resulted in a meltdown of the financial sector and in a collapse of the real economy. social hardship would have hit the citizens of the programme countries much harder. and let us also not forget that in one case there was an extensive debate on the potential exit from the euro area. instead, what have we experienced these last four years? tremendous efforts have been made to repair financial sectors, improve the functioning of the economy and consolidate public finances. that ireland has just exited from its programme and regained market access is a demonstration of this hard - won achievements. in all the programme countries we have seen major progress, especially as regards fiscal adjustment and the stabilisation of banking systems. cost and price competitiveness are being regained step by step ; structural reforms are showing first results. market access has improved. nevertheless, unemployment remains unacceptably high and the recovery is fragile. therefore, governments should not undo the progress made. instead, they should keep bis central bankers ’ speeches going down this difficult path. incidentally, this applies not only to the programme countries, but to all euro area member states. lessons to be learned i would like to draw three conclusions from what i just explained. first, the programmes were the necessary answer to some member states finding themselves on the brink of default. second, the troika was the best available instrument in the given circumstances. and third, with hindsight and taking into account the difficult situation as well as the imperfect information available at the time, the troika has provided sound advice. where does this leave us? i believe the experience of the last four years offers some important lessons. the