generate new causes of concern and possibly justify new regulation or increased monitoring. four aspects are particularly relevant from this perspective : 1. there has been a significant expansion of the financial sector in the past decades well above the growth rate of the real economy. the financial sector became more important and more complex and ensuring its stability became consequently more essential. 2. the sector changed in the direction of being more market - based with a reduced role for traditional relationship banking. technological developments in itc, the greater availability of information, the standardization of financial contracts, all contributed to a sort a ‘ commodification ’ of financial transactions. this has implied that monetary institutions and monetary aggregates have lost weight in the total of financial assets, meaning that leverage over the monetary base has increased continuously. also, it is important to underline that this expansion was accompanied by a greater share of a non - regulated segment including hedge funds, private equity institutions etc. 3. financial innovation produced new products and tailored new securities to particular needs in terms of maturity, risk and liquidity. the complexity of derivatives and structured products grows all the time as well as the size of derivatives markets. the more recent example is of course the phenomenal growth of the market for credit derivatives. credit default swaps ( cds ), collateralized debt obligations ( cdo ), credit - linked notes, credit spread options and other products developed into a market that represents now more than 16 trillion euros and is bigger than the total stock of existing corporate bonds and loans. these instruments fulfil useful functions by allowing the transfer of risk, isolating and pricing pure credit risk, providing liquidity to individual credits in times of stress and improving the management of risk for various institutions etc. they create at the same time new sources of risk due to their complexity, the uncertainty of mark - to - model valuations not tested in times of trouble specially when secondary markets are not very liquid in general. 4. the fourth aspect deserving mentioning refers to the growing interdependence of markets across types of products, across institutions and across borders. the more market - based financial system continues to depend from monetary institutions for the provision of liquidity and credit lines. markets for different types of assets tend to depend from common factors and show co - movement of returns. this greater interconnectedness is an element that creates the so - called ‘ endogenous ’ component of risk, i. e. system - wide risk that is created by the financial sector itself

, reaching the mto ; ( v ) consolidation effort exclusively on the expenditure side ; ( vi ) increase in the implicit interest rate on public debt to 4. 4 % in 2020 ( 3. 9 % in 2012 ). source : banco de portugal. ii. the post - troika period the challenges that lie ahead after the conclusion of the economic and financial assistance programme are not smaller than those faced in the course of the programme. more specifically, we must be able to answer the following questions : how can we ensure that the return to the financial markets is not reversed? how can we ensure sustained and balanced economic growth of the portuguese economy within the euro area? as mentioned by the president and mr. buti, to answer these questions certain conditions must be fulfilled both at domestic and external level ( figure 6 ). at domestic level, and in the short run, the adjustment process of the portuguese economy must go forward. this means, inter alia, to proceed with the consolidation of public accounts, improve banking system profitability, push on with the household and corporate balance sheet adjustment, create a social security network for long - term unemployed and to set up conditions inducing potential output growth in portugal. bis central bankers ’ speeches figure 6 conditions for a successful exit of the programme looking further ahead, a new institutional framework must be established, on the basis of a broad consensus, fostering behaviours consistent with the maintenance of fundamental macroeconomic balances and the economy ’ s competitive capacity. in this context, the first point to have in mind is social cohesion. the ongoing sectoral shift in the portuguese economy suggests that unemployment rates should remain high over a protracted period of time. safeguarding social cohesion is key so we can manage unemployment in line with its structural nature. in fact, a mechanical exercise conducted in banco de portugal shows that an 8 per cent annual growth of external demand up to 2020 would have a cumulative reducing impact of 7 p. p. on the unemployment rate ( to around 11 per cent ), which means that the solution to our unemployment problem does not lie on the demand side. we must be able to free up and generate entrepreneurial skills, attract foreign direct investment and boost our productive sector. at the same time, we must create support schemes to re - train long - term unemployed with a view to increase their employability. in addition to social cohesion, there are two other conditions which i find important. the first is the creation of a political consensus on