In line with the new Government’s announced policy, the Central Bank now gives the priority to it to have due justice to the depositors. We need to fix the finance companies sector and their risky business models through strong regulation and market discipline. Otherwise, this sector will pose risk to the financial system stability in next 10 years. Another regulatory intervention that created immense macro economic consequences was the attempt to appreciate and maintain the currency highly over-valued during the period 2009 – 2012 at around Rs. 109 – 110 per US Dollar. For this purpose, the Central Bank lost about $ 3.5 billion of foreign reserves leading to a foreign exchange crisis. Finally, crisis was managed by raising a loan of $ 2.6 billion from the IMF to restore the international reserve and allowing a sharp depreciation of the currency to around Rs. 134 per $ in June 2012. This intervention led to raise interest rate, control credit and raise fuel prices which had dampening impact on the growth of the economy reducing to 6.3% in 2012. In this regard, although some raise concerns over current intervention in the exchange rate, we are comfortable with current level of international reserve, pending already arranged inflow of foreign resources to strengthen the reserve. Another case in point is the Pramuka Bank failure in 2002 – 2004.
Within the context of the exercise of the asset quality review the non-performing exposures of the banks were increased by € billion, out of which come, of course, the € billion that have to be adjusted. Another measure of the strictness of the exercise is given by the fact that the combination of the AQR with the stress test results in a drop in the median capital ratio of the banks of 4 percentage points, which is higher than in previous exercises. And in terms of billions, this means that the exercise leads to a decrease of € billion overall for all the banks, out of which € billion corresponds to the capital shortfall, meaning the banks that came below the threshold of 5.5%. But this is a measure of the strictness of the exercise that it had such an impact on the balance sheet of the banks, and it’s a usual measure of the impact of such types of exercises. But it’s also a measure of the resilience of the system because, in spite of this drop of € billion, the vast majority of banks stayed above 5.5% and were able to support such a shock, and still have a capital ratio above the threshold. And let me underline that the threshold of 5.5% is well above the regulatory minimum, because as you know the regulatory minimum for common equity capital ratio will be in 2018 4.5%, so we have chosen a more demanding threshold.