 Good morning everybody. I am delighted to welcome you to the first ACV Macropodential Stress Testing Conference. This conference that we try to do it by annually intends to support research on macropodential stress testing and provide an opportunity for researchers and policymakers to present and consider the latest thinking in the field. This conference also represents an important step in the context of the analytical work on stress testing carried out by the ECB also in cooperation with the national authorities. The goal is to operationalize state-of-the-art methodologies and academic research on stress testing, risk analysis and policy impact assessments and develop common and consistent stress testing tools, leveraging our practical experience academic research and the analytical capabilities already available at the different institutions. In my remarks today I will cover three aspects of recent developments related to stress testing. First I will briefly reflect on the evolution of stress testing as a policy tool and on the main characteristics which should be included in macropodential stress testing analytical exercises. Second I will detail the macropodential stress testing framework which was recently developed at the ECB. And I will also illustrate a policy assessment exercise which has been lately carried out relying on this setting. Finally I will mention some further processes which are needed in the context of macropodential stress testing to further enhance the analytical toolkit which is essential to support policy analysis in Europe. As you know since the financial crisis stress tests have become an important tool for central banks and banking supervisors and have been used for different goals. During the financial crisis stress tests were used mainly as a crisis solution tools aiming at identifying capital shortfalls in the banking sector and enhancing market discipline through the publication of consistent and granular data on a bank-by-bank level. In more recent years stress tests have rather served the purpose of crisis prevention aiming to identify vulnerabilities in the financial system and to assess the resilience of the banking sector and individual banks to adverse macro financial shocks. In recent years the ECB has developed an overarching macropodential stress testing framework which relying both on macroeconomic and bank level data is able to model the interdependency between the financial sector and the real economy as well as cross-country spillovers via trade linkages. Thanks to its semi-structural features it accounts for a number of non-linear amplification mechanisms which are featured by the financial sector during periods of stress such as the leveraging searches in risk-premia and credit crunches. This framework models the economies of the 19 countries of the euro area and banks behavioral reactions to adverse conditions and is very well able to capture the heterogeneity of the euro area banking system. Banks as you know can indulgeously adjust the size and composition of the balance sheet, modify their dividend policies and reset their interest rates on both loans and deposits in response to economic conditions and depending on their own characteristics such as solvency, asset quality, profitability and balance sheet structure. The macro potential stress test in exercise which produces both bank level and banking sector projections can be exploited to analyze medium term prospects of the banking sector and used to conduct policy assessments. It was recently used in combination with a growth at risk approach to assess the macroeconomic costs and benefits of the finalization of the Basel 3 agreement in cooperation with the European Banking Authority. This analytical structure can also help us with the calibration of macro potential policies. For instance it shows how the timing of the introduction of a capital based policy matters for its effectiveness. When the new policy is faced in in good times banks are able to build up additional capital by retaining their profits and do not need to shrink their loan books to improve capital ratios. On the other hand at the onset of a slowdown the facing of a new capital policy is likely to trigger a reduction in grade and put an additional drug on the economy. Bad timing aggravates the costs of macro potential regulatory interventions and can limit their effectiveness. The DCB is continuing to invest resources to push ahead the research frontier on macro potential stress testing. At the current stage we are working to extend our analytical toolkit in at least two main dimensions. First we have engaged in the development of a comprehensive analytical construction for carrying out a climate risk stress test analysis. This framework will allow us to study the potential impact of climate related risks for the euro area banking sector as well as the impact of fiscal and financial policies to address climate change related concerns. The analysis will investigate in particular the system wide materiality of the risks related to the transition to a low carbon economy for bank solvency and lending capacity. Also looking at the implications for the overall economy. Work on the impact of increases in physical risk will follow to complement the work on the transition risk. Second in cooperation with staff from the national central banks of the euro system we are working on the development of an analytical stress testing system able to capture the interactions between banks and non banks financial institutions. This endeavor is of particular importance given the material growth of the non bank financial sector in the last years and due to the possible risks which could stem from this part of the financial system. This new framework should allow us to take into account both direct and indirect contagion mechanisms. Liquidity and solvency interactions, dynamic balance sheet developments as well as endogenous reactions. It should help to reveal vulnerabilities in the non bank financial sector and assess the potential for spillovers most notably due to fire sales. Let me conclude. Since the financial crisis the importance of stress tests as a policy tool has been increasing. Microprudential stress tests are a tool to assess the capacity of the financial sector to withstand adverse macro financial developments without reducing the extension of grade to the real economy. They are used to inform a potential policy discussions and to carry out policy assessments. Against this background DCB has developed its own macro potential stress testing framework which relies on a state of the art models and which is increasingly used for policy work. However, as I mentioned already, further progress is needed to maintain our analytical toolkit at the frontier and enhance its usefulness in policy analysis. This conference which will focus in particular on the implications of stress testing on banks behavior, macroprudential stress testing as a policy tool, system-wide stress testing and stress testing of non bank financial institutions is a great opportunity for DCB to encourage research on macroprudential policies and foster cooperation on this topic with other institutions and the academia. I wish you all a very fruitful conference. Thank you very much.