4/9  In this respect, an agreement was reached at the Euro Summit in December 2018 to establish a common financial backstop for the SRF. This took the form of a credit line provided by the European Stability Mechanism, to be repaid by the banking system itself through its future contributions. The launch of this financial backstop, currently scheduled for 2024, could be brought forward to 2020 if it is considered that sufficient progress has been made to reduce banking risk. Here it is important to note that the percentage of bad loans on euro area banks’ balance sheets has fallen notably in recent years, down to close to 4% of all loans, albeit still somewhat above the pre-crisis level. Likewise, banks’ capitalisation levels have improved substantially; the total capital ratio for euro area banks overall now stands at 18%. A further key aspect for completion of the design of the euro area is the creation of the common European Deposit Insurance Scheme; this would be the third pillar of Banking Union. In my view, it is difficult to believe that, without this third pillar, the first two will be able to guarantee in a credible manner the same level of protection for all depositors across the euro area, irrespective of where they are located. Sufficient confidence to mitigate the risk of large-scale bank runs and the consequent financial fragmentation in severe crisis situations would thus fail to be generated.
This answers to the fact that cyber knows no borders and the significant operational interlinkages between our systems and it reflects the growing dialogue with the US and others as to how best to manage the risk to financial stability from cyber. So it is clear the world has changed; cyber is an ever-present threat. Firms need to stand ready to manage this risk. And just as cyber has changed the world for firms, it has also changed the landscape for authorities; we need to adapt our approach to operational resilience of the financial sector as a whole. Our work in response to the FPC’s recommendation typifies this; but we will continue to work with firms, government and cyber experts to learn and evolve our approach. 7  4  http://www.bankofengland.co.uk/financialstability/fsc/Documents/wakingshark2report.pdf. BIS central bankers’ speeches