) and by corporate strategies. in this regard, the role of the so - called national innovation system should be stressed, i. e. the network of public and private sector institutions and the interaction mechanisms behind the production, use, diffusion, absorption and exploitation of new knowledge and technologies by a company or group of companies. empirical evidence shows that r & d expenditure, the level and type of education and the articulation between the educational and professional training subsystems are responsible for the position of countries within the international division of labour and, in particular, for the specialisation pattern ( intersectoral specialisation, or as an alternative, intrasectoral vertical specialisation ). on the one hand, the articulation between the three subsystems ( research, education and professional training ) should be enhanced. on the other hand, the articulation between the national innovation system and corporate needs, in particular in the tradable goods sector, should also be improved. finally, i would like to point out the critical importance of maintaining and strengthening the stability of the financial system. this system plays a fundamental role in the functioning of the portuguese economy and, in particular, in an efficient allocation of internal and external resources, channelling them to the sectors and economic agents with funding needs. the portuguese banking system is solid. it was not exposed to the sub - prime crisis or to the speculative bubble in the real estate sector. own funds are adequate given the current level of balance sheet risk : the tier 1 capital ratio stood at 9 % in 2010 and the core tier 1 capital ratio at 8. 2 %. obviously, the banking system suffered from the impact of the international crisis and the decline in growth. as expected, between 2007 and 2010, the total ratio of non - performing loans increased from 1. 5 % to 3. 3 % and the return on equity decreased from 14. 63 % in 2007, to 7. 37 % in 2010, after having dropped to 3. 44 % in 2008. however, the portuguese financial system shows some specificities that should be addressed. first, as a reflection of the above - mentioned imbalance between domestic savings and domestic borrowing requirements – resulting from the development model of the portuguese economy in the past few years – the transformation ratio of deposits into loans stands at 1. 44 for the portuguese financial system as a whole. due to this fact, there is a significant dependence on external financing. this explains the reason why the portuguese banking system became heavily exposed to

also argued that “ [ t ] his requires that the national supervisors and parliaments should receive the necessary information to understand the risks national depositors are exposed to from these branches and the possible impacts on the financing of their economies. this may require developing specific reporting instruments and processes for the local authorities to continue to be able to appropriately supervise local activities and thus contribute to supervisory decisions taken at the ssm level that may impact their jurisdiction. ”, eurofi ( 2019 ), programme of the eurofi high level seminar in bucharest, 3 - 5 april. viii as evidenced by the high - level working group chair report on the strengthening of the banking union, including edis ( op. cit. ) : “ broad agreement exists on the need for a harmonisation of necessary parts of bank insolvency law, including with regard to cross - border groups and the ranking of creditors, while the toolbox for resolution might need to be expanded. ” ix this report is expected to feed into the review of the single resolution mechanism, european commission ( 2019 ), “ report from the commission to the european parliament and the council on the application and review of directive 2014 / 59 / eu ( bank recovery and resolution directive ) and regulation 806 / 2014 ( single resolution mechanism regulation ) ”, available at http : / / ec. europa. eu / transparency / regdoc / rep / 1 / 2019 / en / com - 2019 - 213 - f1 - en - main - part - 1. pdf, and european parliament ( 2019 ), briefing for the purposes of the public hearing with elke konig, chair of the single resolution board on 2 april 2019. the european parliament econ committee has also commissioned an external study on “ lessons from the united states for banking resolution in the banking union ” to be published in spring 2019. x state aid sa. 50640 ( 2018 / n ) – italy – liquidation scheme for small banks, available at http : / / ec. europa. eu / competition / state _ aid / cases / 274069 / 274069 _ 1989761 _ 107 _ 2. pdf. xi judgment in joined cases t - 98 / 16, italy v commission, t - 196 / 16, banca popolare di bari scpa v commission, and t - 198 / 16 fondo interbancario di tutela dei depositi v commission. xii the dgs directive also recognises that dgs funds may be used