I turn now to accounting standards and capital requirements. These have also exacerbated the markets' recent problems because of rules that are 'pro-cyclical'. When market liquidity becomes tight as of now – sales decisions and valuations based on the so-called 'mark-to-market value' reinforce the downward spiral: They result in further forced sell-offs, which in turn reinforce and amplify the falls in mark-to-market prices. That is why I recently brought forward a measure to provide firms with more flexibility on the mark to market requirements and to facilitate asset transfer from the trading to the banking book.

Dynamic provisioning served many banks well in the past. In this turmoil it has served the Spanish banks well and I would like to see a return to it more broadly. A system that introduces significant counter-cyclicality, requiring banks to build up more substantial buffers in good times so that they can let them run down in bad times, makes sense not only from a micro viewpoint – reducing the risk of bank failure – but from a macro viewpoint too: It serves to restrain excessive expansion during booms. And it reduces the likelihood of a much diminished capital base in recessionary times which makes it more difficult for banks to lend, thereby preventing the kick-starting of sustainable recovery.

Ideally, we should get international agreement on such a revised regime and I will be pushing for it.