our economic outlook and risk assessment, and to explain the current monetary policy stance, the ecb, like other central banks, at times has to adapt its communication and actions to exceptional or unanticipated developments. effective central bank communication is especially important in periods of heightened uncertainty – like the geopolitical tensions that followed the tragic events of september 11, or the recent turmoil in global financial markets, or occasionally in response to the uncertainties and misperceptions surrounding the outlook for future monetary policy. while such situations may pose unprecedented communication challenges to central banks and may require different policy responses, central bank communication in these circumstances should aim to restore trust and preserve confidence among financial market participants, and to indicate, if necessary, that the monetary authorities are alert and ready to act promptly and effectively, in line with the statutory objectives and assigned tasks, to preserve price stability and safeguard financial stability. let me provide two examples. the first goes back to november 2005 and may 2006. on both occasions, market expectations about the need for, or the size of, future policy adjustments were out of line with those of the ecb. so, on both occasions, we made market participants aware of these misperceptions, through appropriate communication, and thus avoided surprises and market volatility. the second example is provided by the recent period of financial market tensions. two messages had to be clearly conveyed. one was that the ecb stood ready to take the necessary measures to ensure the orderly functioning of the interbank money market. the other message was to make it perfectly clear that special market operations to reduce the volatility of very short - term rates around the key policy rate and to contain elevated pressures in the term money market would not undermine the price stability objective and would not involve any risk of tolerating or encouraging imprudent behaviour by market participants. it is therefore essential, at least in the ecb ’ s experience, that a clear distinction be made in central bank communication between actions that belong to the monetary policy implementation sphere and those that aim to ensure the orderly functioning of the money market and the safeguarding of financial stability. such messages about the objective and nature of the ecb ’ s recent money market operations helped to stabilise longer - term inflation expectations at levels consistent with our price stability objective and to restore orderly conditions in the money market. iii. 4 minutes and voting records with these and other forms of communication in place, the ecb has achieved a high level of transparency

rates. or as president lagarde put it1 : " we have faced the worst pandemic since the 1920s, the worst conflict in europe since the 1940s, and the worst energy shock since the 1970s ". these all were the kind of events that happen infrequently ; any one of them could have resulted in significant weaknesses in the banking system. but thanks to the work of my predecessors, the banking system proved resilient in the face of these threats. the robustness of the system is evident in the data : in 2015 the average ratio of nonperforming loans ( npls ) for significant banks in the banking union was 7. 5 %, at a time when some banking systems had ratios nearing 50 %. by the end of the second quarter of this year, it had decreased to 2. 3 %, driven mainly by the reduction of npls in highnpl banks. likewise, the common equity tier 1 ratio for significant banks has improved, rising from 12. 7 % in 2015 to 15. 8 % today. bank profitability has increased considerably in recent quarters, benefiting from higher interest rates, and return on equity now stands at 10. 1 %. this resilience is also a result of the strengthened supervisory and regulatory framework after the global financial crisis, including the creation of european banking supervision. the limited repercussions from the banking sector turmoil of march 2023 are also testament to the robustness of our banking union. in the meantime, the environment in which banks operate has substantially changed, becoming more complex because of a range of exogenous shocks and structural shifts in the financial services landscape. novel risks are intensifying, such as those stemming from macro - financial and geopolitical shocks, digitalisation and climate change, which have increased the overall level of uncertainty. when considering the competitiveness of the european banking sector, i am aware that we are living through a technological renaissance. the rapid pace of change presents both opportunities and challenges, and without proper investment, the threat to competitiveness will undoubtedly become a reality. it is against this background that we reviewed our supervisory review and evaluation process ( srep ) to ensure that we can continue to deliver effective supervision to promote banks'resilience. one of the cornerstones of this reform project is to further improve the way we use qualitative measures to make them enforceable and legally binding. in my view, good supervision is characterised not only by a robust framework,