Montag, 14.10.2019 12:28 Uhr

Benoît Cœuré, Member of the Executive Board of the ECB

Verantwortlicher Autor: Carlo Marino Rome, 27.09.2016, 09:00 Uhr
Nachricht/Bericht: +++ Wirtschaft und Finanzen +++ Bericht 5855x gelesen

Rome [ENA] Benoît Cœuré, Member of the Executive Board of the ECB was in Rome yesterday guest of IAI, Italian Institute of International Affairs. He talked of the ECB's operational framework in post-crisis times, times where there is political fragmentation in European Union, where the environment is shaped by discussing its social model , with high unemployment and fighting Member States .

There is a need of an institutional improvement of the Eurozone. Confidence is low in the European Union and it’s above all a question of leadership. People request a more efficient Europe. The lack of confidence makes more difficult to address the problems the European Union leaders are confronted with. There are a lot of emerging economic urgencies. According to Coeuré “Institutional strengthening of the EU is important but it will take time, there are no miracles. The European Central Bank is creating a supporting environment for investing in the Eurozone. There are two challenges that stand out. The first is how monetary policy should adapt to structural shifts in financial intermediation.

The second is how to cope with the constraints imposed on central banks by the effective lower bound of interest rates.” Restructuring is very important because Europe needs banks able to act in a different way. There is the necessity to reconcile Europe with the citizens because the European Union has been a guarantee of peace. The ECB’s operational framework proved flexible when the crisis hit, helping cushion the initial financial turbulence. And as the crisis unfolded in successive "waves" and materially altered the market environment, ECB adopted further measures to meet the new challenges it faced.

In the euro area, financial markets underwent severe spatial fragmentation in the early phase of the crisis, with intermediation retreating behind national borders and impairing the bank lending channel of monetary policy. The move towards fixed-rate full allotment liquidity provision, the widening of ECB collateral framework and the extension of the maturity of the lending operations acted as crucial stabilisers and averted sudden stops in market funding for national banking systems. While this problem has now largely disappeared, it would be complacent to see it as completely resolved.

Some key components of the banking union (such as the build-up of the Single Resolution Fund and the removal of national options and discretions in bank supervision) are still being phased in, and some key drivers of fragmentation, such as the bank-sovereign nexus, remain unsolved – not to mention a lingering risk of political fragmentation. The second structural shift in patterns of intermediation, a global one, is linked to financial regulation. Tighter financial regulation is both increasingly affecting the behaviour of supervised entities, and encouraging a parallel shift towards unregulated forms of finance. This dual process has repercussions for monetary policy implementation.

It increases demand for safe short-term instruments to meet new regulatory requirements, such as the liquidity coverage ratio and margin requirements for derivatives. Another challenge – the effective lower bound – recent evidence suggests that real neutral rates have fallen to very low levels, driven by both cyclical and structural forces. This challenge is common to advanced economies but it is more pronounced in the euro area than in the US, given its markedly lower rate of potential output growth. In this context, all major central banks reduced interest rates to very low levels, thereby approaching the effective lower bound on interest rates.

They responded to this via different measures: providing forward guidance, launching large-scale purchases of public and private sector assets, and by implementing a negative interest rate policy.The European Union is facing an exceptional situation where the real equilibrium rate is very low. All the monetary policy measures ECB has taken were a necessary response to this. They stabilised the euro area economy and anchored medium-term price stability. But they were done on the assumption that low real rates would be temporary, because other policies would act in their fields of responsibility.But if this situation lasts for too long the return for the economy is low.

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