Against this background, this box examines the possible implications of an increase in short-term market rates, as currently expected by market participants, on euro area banks’ retail customer-related net interest income. On 23 September 2010, the ECB published the results of the Euro Money Market Survey 2010, which were based on data collected from banks in 27 European countries and covered developments in various segments of the euro money market in the second quarter of 2010. This box reports on the survey’s main findings. In the EU, the United Kingdom and the United States, new macro-prudential frameworks have been established, including the creation of new official bodies to improve systemic oversight and coordinate macro-prudential interventions. This box briefly describes the structure and responsibilities of these bodies and outlines the main differences. From early 2010 fiscal imbalances in certain euro area countries have been causing tensions in sovereign debt markets. Euro area countries responded by affirming their willingness to take determined and coordinated action, if necessary, to safeguard financial stability in the euro area as a whole. In this context, on 2 May 2010 euro area countries agreed to activate, together with the IMF, a three-year financial support programme for Greece. On 6-7 May 2010, tensions escalated abruptly in financial markets. In line with their earlier commitment, European governments took urgent and unprecedented action to safeguard financial stability. On 9 May 2010, the Member States agreed to establish a comprehensive package of measures, consisting of three elements. The combination of a general economic slowdown and the intensification of the financial crisis in late 2008 resulted in a marked reduction in lending to non-financial corporations in the euro area. Survey-based evidence suggests that the slowdown in credit to the euro area corporate sector reflects both lower borrower demand and more restrictive loan supply by banks faced with pressures on their balance sheets. However, the economic impact on and hence potential feedback loops to the financial sector crucially hinge on the extent to which the borrowers facing a less abundant supply of bank credit are able to replace it with other sources of finance. Against this background, this box sheds some light on whether lending to smaller companies, which are typically more bank-dependent, has declined by more than credit to larger firms. Private capital inflows into emerging economies have rebounded well from the trough experienced in 2009. The International Institute of Finance (IIF) estimates that the net private capital flows to emerging economies will total USD 825 billion in 2010 and USD 834 billion in 2011, significantly higher than the USD 581 billion recorded in 2009. The most significant changes are expected in private creditors’ (commercial banks and non-bank financial institutions) net inflows into emerging markets. Moreover, net portfolio investments in emerging markets are expected to continue to be sizeable in the medium term, totalling USD 187 billion in 2010 and USD 143 billion in 2011. In fact, using high-frequency data from a survey among fund managers (Emerging Portfolio Fund Research – EPFR) shows that portfolio inflows into emerging market assets, particularly into emerging market debt securities, started to rebound as early as the second quarter of 2009. In cumulative terms, inflows into emerging market equity markets exceeded the outflows recorded during the crisis by mid-2009, while bond markets have registered net inflows in cumulative terms since the second quarter of 2010. The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which have been major providers of credit to US mortgage borrowers, have become increasingly relevant to financial stability, in particular in the recent crisis. First, in September 2008, due to the systemic risks attached to these entities, Fannie Mae and Freddie Mac were placed under temporary government control to avoid insolvency. Second, the Treasury entered into a Senior Preferred Stock Purchase Agreement providing limited guaranteed capital injections, which in December 2009 were extended to allow unlimited capital infusions over the next three years. Against this background, this box examines the current role of the GSEs in the US housing market, their fiscal costs and the possible downside risks to the housing market and to financial stability more generally once the support is scaled back. This special feature describes the key characteristics of macro stress tests for banks specifically in relation to their use during financial crises. The analysis draws on recent experiences in the United States in 2009 and in the EU in 2010, where macro stress tests for banks were used in one of the most severe financial crises in decades. The financial crisis has revealed a number of shortcomings in the existing framework of prudential regulation. This special feature outlines the main elements of the Basel Committee on Banking Supervision’s proposals to strengthen global capital and liquidity regulations, commonly referred to as Basel III. Macro-prudential policy aims to secure the stability of the financial system. The global financial crisis has shown how linkages between countries play a significant role in transmitting financial shocks. It is therefore of interest to examine macro-prudential policy for a group of countries as a whole. The macro-prudential policy stance based on an analysis of a group of countries may differ from the policies resulting from an analysis of each country in isolation. This special feature examines how similar stand-alone macro-prudential policies would have been for a selected group of countries and compares the desired stand-alone policies to a policy derived from a portfolio analysis. The desired macro-prudential policy stances (tight, neutral or accommodating) are derived from a set of historical indicators intended to measure systemic risk, but which clearly need further refinement. The degree of similarity between the countries’ policy stances varies over time. During some time periods it is quite high. Furthermore, the analysis shows that the desired macro-prudential policy stance derived from individual country data at times broadly corresponds to the policy stance derived from aggregated data for the portfolio.