##weighted assets. in addition to the quantitative increase of equity capital, its qualitative enhancement via the increased share of tier 1 capital in prudential own funds played a dominant role in the banking system ’ s overall stability. the main factors behind the increase in prudential own funds of banks and their groups were the : issuance of preference stocks acquired by the greek government as part of the liquidity enhancement plan ( law 3723 / 2008 ) completion of capital increases funded by the market internal financing stemming from non - distributed profits appreciation in the prices of stocks held by banks. as a result, greek banks ’ capital levels are at a par with the eu average ( 11. 7 percent ), with a tier 1 ratio of 10. 6 percent ( q3 2009 ) from 7. 9 percent at end 2008. the leverage ratio stands at 13. 4 and is significantly lower than the european average. profitability greek banks have remained profitable. net interest margin stood at 2. 6 percent during the first 9 months of 2009, twice the eu average. however, profitability declined y - o - y by around 42 %. this outcome was the unavoidable result of the crisis that hit greece with a time lag and was aggravated by the structural and fiscal imbalances that characterise the greek economy. impairment charges have been the key drag on profits. roe and roa after taxes ( 7. 5 percent and 0. 5 percent, respectively, during the first 9 months of 2009 ) also declined but remain above the eu average. the cost - to - income ratio, at 51. 9 percent, has decreased thanks to cost containment and is lower than the large and complex banking groups ’ euroarea weighted average ( 60. 7 % for the first half of 2009 ). however, it is of some concern that trading income, notable for its high volatility, represented a considerably large chunk of profits before taxes. the increase of trading income during the first 9 months of 2009 compared with the same period a year earlier, was attributable mainly to the increase in the price of greek government bonds and stock prices in the second and third quarters of 2009. these trends have currently been reversed, rendering any gains from trading and financial transactions during the last quarter of 2009 and the first part of 2010 highly unlikely. asset quality in the course of 2009, the quality of the loan portfolio declined, resulting in an increase of the npl ratio ( on a solo basis ) to

7. 2 percent in september 2009 ( from 5. 0 percent in december 2008 ), albeit at a decelerating rate. the npl ratio increased for all types of loans, but the increase was more pronounced for consumer loans ( september 2009 : 11. 7 %, december 2008 : 8. 2 % ). the npl ratio for mortgages reached 6. 9 % ( from 5. 3 % at the end of 2008 ) and for corporate loans reached 6. 4 % ( from 4. 3 % at the end of 2008 ). with greece experiencing the first domestic recession since the early 1990s and with a rather subdued private sector credit expansion and a public sector trying to address chronic fiscal imbalances, the medium - term outlook regarding asset quality is challenging. a further decline in loan quality and increases in impairment charges are likely both domestically and abroad ; economic conditions in see have improved but significant challenges still remain, observed and expected increases in unemployment being a key concern. additionally, a high percentage of loans in see is fx - denominated and unhedged from the borrowers, which should further strain the balance sheets of households and corporates. so greek banks should be particularly vigilant and pro - active in the management of their loan portfolio and overall balance - sheet. liquidity the global financial crisis and the freezing of liquidity in international markets have affected funding operations, a situation that, has in turn affected the liquidity buffers. as in other european economies, given the difficulties in wholesale financial markets, ecb lending facilities have become a major source of funding, alongside the increase of the banks ’ deposit base and the greek government liquidity support package. all of these sources of funds helped the greek banking system to increase its liquidity position during 2009. at the end of september 2009, the loan - to - deposit ratio stood at 113 %, one of the lowest in eu, and the financing gap ( i. e., the difference between deposits and loans ) shrank. the total borrowing of greek credit institutions from the eurosystem / bank of greece, at the end of november 2009 amounted to 8. 5 % of total assets. at the same time, the liquidity allotted to greek banks in the ecb ’ s open - market operations represented 6. 3 % of the total liquidity provided at the eurozone level. in the december one - year eurosystem financing operation this percentage dropped to 6. 0 % and is expected to fall again this