Welcome to all participants of this event. This is a European Central Bank Youth Dialogue this year 2020 in Cologne. So unfortunately not live, but in an online format. And it's a great honor for us here in Cologne to welcome you, Mr. Degindos from the ECB, the Vice President of the ECB. So that's a great event for us to have you here. So further I would like to welcome all other participants and specifically the students of course, because this is an event which is dedicated specifically to young people and the students here in Cologne, specifically where we have the chance to ask Mr. Degindos questions and to discuss with him issues related to the ECB. So I will not talk too much, but let me brief mention at the beginning that this meeting is jointly organized with the ECB, the Institute of Economic Policy, and the class of excellence it contributes. The Institute of Economic Policy is a research institute here in Cologne founded in 1950, and it's dedicated to research on economic policy solutions as institutions, and it contributes the other co-organizer. And this is what I'm specifically proud of. It's a joint research project organized by the University of Cologne and Bonn, and it's funded by the German excellent initiative. It's an excellence cluster, and it's the only one in economics. So maybe Mr. Degindos, you know that your current colleague, Isabel Schnabel, was previously also spokesperson of a contribute. So that's unfortunate for us that she left the University of Bonn, but of course she is perfectly in place at the ECB, I say. So let me now come briefly to the main person for today. This is Mr. Degindos. As I mentioned, he's vice president of the ECB, but I think even more important for us, he is an outstanding expert in financial market issues. So he is director at the ECB responsible also for the areas of risk management, macro-prudential regulation, and financial stability. And I think that this issue, financial stability, is something which from my perspective at least for today, might lead to the most interesting parts of the discussions, because in these exceptional times, I think financial stability also face exceptional threats. But now I would like to hand over to Mr. Degindos. Well, first of all, good afternoon. This is my pleasure to be here with you, despite the fact that we cannot make it physically. But I hope that next time we will be able to do it in person. It will be a very good sign that we have defeated the pandemic. And I am totally sure that next time we will be able to do it in person. I think that human touch is always important. So thank you very much, Professor Schabert, for the introduction. I can give you perhaps some thoughts about the financial stability landscape now in the Euro area. And I think that the first thing that we have to take into consideration is that this is not, let's say, a traditional shock, a traditional crisis. This crisis has been produced by an external factor, a so-you-know factor, that is now a pandemic, something that was totally unprecedented and unexpected. It gave rise to a very important drop in GDP, very intense and very concentrated. And it was related to the containment measures that were taken by the different governments. And once the governments started to open up the economy, the recovery started to take place. So in terms of financial stability, and this is a difference with what happened in 2010, 2012, this has not been produced by the financial sector. The financial tightening was the consequence of the pandemic and the important drop in activity that gave rise to a big decline in the revenues of corporates. Corporates, because of the lockdown, found that perhaps the revenues started to drop by 20%, 30%, 40%. So that was a big difference with respect to what happened in previous crisis. It was not only the intensity, it was the origin. The origin was not a tightening of monetary policy implemented by the central banks. It was not a financial crisis, it was an external factor. So the situation of the banks, that is the main part of the financial system in Europe, was quite different to the one that we had in 2008. The level of capital was much higher, the level of liquidity was much better. A lot of measures were taken in order to try to make the banks much more resilient. And simultaneously, there were also some problems before the pandemic, before corona. And the main problem of the banking system in Europe was the very low profitability situation. This low profitability situation is something that has given rise to very low valuations in markets. If you compare, for instance, the price to book of the European banks in comparison with other jurisdictions, for instance the US, you will realize that the price to book here in Europe is much, much, much lower. And this is a source of concern. As simultaneously the pandemic is having an impact in terms of activity, in terms of the evolution of non-performing loans, that is going to aggravate this low profitability situation. So it's not going to be a solvency crisis, it's going to be a profitability crisis. Profitability is the key element in our view. The main source of concern now with respect to the financial stability situation in Europe. Maybe I should describe briefly what are the possibilities today within this discussion or this meeting. So of course we are happy then that you ask questions. Just raise your hand so that's a function that you can activate. I suppose that you're familiar with that, so that's a possibility that I can see who is willing to ask questions. And then you can of course be activated and then would be nice if you unmute yourself that we can understand you. Of course and also that we can see you, please activate also your video, that would be great. Before we get to the open discussion, I would say, we thought about we address maybe some question at the beginning, Mr. Deginlos and myself, more or less maybe also to set the stage or to address already very urgent questions I think that are very apparent. So we discussed before that maybe today it's possible to have at least three topics that we can address, but it might also be that in the end we just focus on the overwhelming question on how the pandemic affects our life and financial markets. But this is open up to you, so you are deciding on what we are discussing in the end, essentially that you are the director, more or less of this meeting here. Okay, so we have some possibilities also at the end of the meeting that you can comment on this sort of meeting, this format in particular or you can also you can give feedback to the ECB in terms of improvements or changes to this format, but there's something which will you will be asked again at the end of the meeting. So I already mentioned this that in any case, please stay tuned until the end, so that would be important. If it's okay, so I would like to start directly with a question which I think all of us are concerned about. So the question, this pandemic, so you already described this in the opening words, Mr. Deginlos, but what are from your point of view the biggest threats at the moment, so what from the perspective also from the ECB, this is the biggest threat coming to the financial markets or banks induced by the pandemic. So and where in these stages of the transmission of this non-financial shock, and which stages you might think is the ECB most helpful? Well, I think that the response of the ECB and the response of monetary policy and as well the response of the fiscal authorities is different to the one that we had 10, 12 years ago. I think that it has been much more intense and much more rapid. If you look at the kind of measures that we have taken, they differ, they are quite different to the ones that were pursued 10, 12 years ago. So I think that this is something that I think that is quite positive. I said before that this is an unprecedented shock. But this is an unprecedented shock in terms of the origin of the shock that is a pandemic, as everybody knows, but as well as in terms of the intensity and in terms of how rapid the pandemic has produced a declining GDP, a declining income for the eurozone and for the worldwide. So the first line of defense, for sure, that is fiscal policy. Fiscal policy, you know, perfectly that all the governments have taken very important measures in order to try to deal and to address the impact of the pandemic. But there is something that is quite obvious that I would like to stress is that despite the fact that the shock is common, the consequences of the shock are not totally symmetric across the countries and across sectors. The impact on services is much more intense and, you know, as in manufacturing, you know, the impact is much more reduced. And taking into consideration that, you know, countries have different fiscal space and that, you know, the structure of the economy of the different countries of the euro area is not identical at all. Then we have seen that there is, you know, disparities in terms of economic performance.  So it's very important that, you know, fiscal policy responds to this situation. But not all the countries have the same or identical fiscal space. That's another difficulty to have. We had countries with public ratios that were in the area of 60, 70 percent, whereas in other cases were above 100 percent. And, you know, the fiscal deficits were not identical at all. So, you know, the rapidity and the intensity of the response, you know, was not identical, you know, across the different countries. That's why the recovery fund that was approved by the European Council is becoming so important. It's becoming so important, not only because it's going to, you know, we're going to have common joint debt issued by the European Commission.  The resources can be allocated to the countries that are suffering more. So with respect to fiscal policy, I think that, you know, these are elements that we have to take in consideration. Rapid response, the first line of defense and the importance of the pan-European package. Let's call it that way. I wanted to show simultaneously that, you know, there is the willingness of the European institutions to respond to this, you know, unprecedented situation. With respect to monetary policy, in terms of the different measures that we have taken, I think that, you know, we have had a three-pillar approach to the crisis. The first one has been, you know, to grant and to inject liquidity to the European banks in very good conditions through, you know, our long-term refinancing operations, what we call the telcos. This is something that, you know, is to deliver, you know, to deliver liquidity to the European banks. The second one is our purchase program. We created and we laid out a very specific program in order to deal with the crisis. That is what we call our pandemic program that started with 750, was increased by 600 afterwards. And last week was, you know, the envelope was additionally increased by 500 in Europe. So in order to try to maintain, you know, financing conditions in the markets. And the third one was, were, you know, the measures taken by the macro-potential authorities in order to try to relieve capital to the banks in order to give the banks leadway to continue, you know, lending to the economy, to the real economy, to households and to corporates. So altogether, when you see, you know, the measures taken by the ECB, but you can realize is that, you know, we have avoided fragmentation in the main fixed income market, that is the sovereign debt market. And this has avoided, you know, fragmentation in order to fix income and, you know, credit markets. And I think that to maintain, you know, these financing conditions and the controls has been key. Because we had, you know, a health shock that gave rise to an economic crisis.  So that was the main intention of our actions. Simultaneously, I think that, you know, as I have said before, fiscal policies are key. Fiscal policies that, you know, were very similar all over Europe in terms of the actions taken.  And the second one has been the public guarantee schemes. Public guarantee schemes that, you know, is a good combination with the liquidity that we have injected with the banks in order to continue maintaining the flow of credit to the economy alive. And to avoid a great, great, great crunch. So I would say that with full respect of the independence of the ECB. Well, you know, I think that the combination of fiscal and monetary stimuli this time has been quite different.  Well, I think that, you know, the instruments that we have used, that we have put in place, both from the fiscal side and from the monetary side. I think that have really reduced the intensity of the shock that otherwise could have been, you know, much more, much more, you know, deep and intense for the European citizens. Thank you very much for this explanation. So of course, we try from as an outsider to understand and fully capture the different measures of the ECB. It's one thing to read it just about it or to see it in the data or also to describe in your words, what are the goals and what are the channels by which one accepts these measures work. So that's of course very interesting. So I was asked for this format to discuss with you as around 20 minutes and then we go through several topics. But I think this topic might be so urgent at the moment. Maybe we'll open the floor now for the students to ask some questions, but because I can think that these issues related to the pandemic and what is happening at the moment might be the one that which are both apparent and most salient at the moment. So if there are any questions, please raise your hands. Then I can see it on the list of participants. Yes, Mr. to be as helps. Maybe you start. Yeah, thanks a lot and thanks a lot for the very interesting introduction. And so you already mentioned that you at the ECB you kind of lowered my provincial macro potential buffers to release capital. And I'm wondering so my understanding was that my provincial policy was in the first place like set in place to deal with crisis that emerge in the banking system or in the financial system. And to do kind of with the credit cycle now this crisis as you said is not in the credit emerge not in the credit market but still you release these buffers. And now if another credit crisis or financial crisis was to hit we had not have any buffers left right. And so I'm wondering whether macro potential policy kind of is kind of dead now after this crisis or whether you expect the buffers to be to be raised or tightened again after the crisis shortly or what's your view on that. Well, you're totally right that you know this crisis is different because of the speed and because of the intensity.  You know, have a different shape than this with this this this one. So this is something that we have to remind and even for our models and this is something that is relevant to capture the nature of this crisis is something that is not easy. Because, well, you know, we are not used to dealing with pandemics of this size with the impacts that the impact that you know this pandemic is having now. So that's the first, the first point, but as you have currently mentioned, you know, the main, let's say, goal of, you know, my confidential policies to try to to build up buffers in good times, in order to, you know, relieve these buffers when you know the situation becomes, you know, more difficult when the when the downswing of the business cycle starts. But that's the main the main principle in order to try to minimize and to, you know, to avoid any sort of amplification of, you know, the great cycle and the impact of this, you know, application of the great cycle into into the economy. In this case, while the reaction was wrapped, you know, the macro potential, the macro potential authorities, you know, immediately released, you know, the, what we call the counter cyclical buffer, the CCYB, immediately, and not only that, even supervisors, so micro authorities also, you know, tried to release capital in order to maintain the flow, the flow, the flow of great. And the main idea was to try to avoid that great, great crunch. There is something that, you know, I would like to stress that I think that is important, you know, because I referred to before, that, you know, the capital situation of the European banks was much better than, you know, the one that we had, you know, 10, 12 years ago before, you know, the previous financial crisis.  Because if your profitability is very, very low, you have difficulties to tap markets because your valuations are going to be as well, you know, very, very low. And so, you know, the dilution of shareholders is huge. And simultaneously, if you are, you know, if you are not a very profitable bank, you're going to have difficulties to generate capital internally, organically. So capital becomes, you know, a very scarce resource. That's why, you know, we are continuously, you know, monitoring that banks use the capital in the correct way. That's why, for instance, you know, we had in place, you know, some suspension of dividend payments.  So why? Because we want to use, we want the banks using the capital in order to maintain the great flow. That was, you know, the intention. But on the other side, you have that, you know, capital is a scarce resource, it's very expensive. And so from the, let's say, from the standpoint of the banks, you know, they will try to minimize the potential use of the capital buffers that we have. We have released. And this is one of the things that we are continuously, you know, monitoring. You have made a good point, you know, what's going to happen, you know, in the near future? Well, in the near future, what we try to do is to give the banks, you know, perspective and forward guidance. We say that, well, we will have to rebuild, you know, the capital buffers, but we will have to do it, you know, over time. Because otherwise, they would not use the capital, the capital buffers that we have released now. So that, you know, the replenishment of the capital buffers will take place, you know, gradually over time. And that, you know, banks will not have to rebuild these buffers. And so that the potential reluctance to use the buffers now, you know, is overcome. So this is the kind of approach that we are doing with macro potential and micro potential supervisory measures. But I think that at the end of the day, you know, the goal is always, you know, the same. The goal is to try to keep the flow of credit alive. Because I have a short before, you know, to the financial tightening of the European corporates because of the pandemic. And so what we have to do is to try to deliver credit and to run credit to these companies in order to cross the river.  Thanks for the first question and the answer, of course. I have some other hands raised here. So I would like to ask Mrs. Faust, Mrs. Faust to raise their hand maybe to unmute yourself. Okay. Can you hear me? Yeah. Okay. And we can see you. Yeah, very good. Hello. My question is, what's your opinion on potential debt cuts for our debt of European countries? Thank you. Well, I want to be extremely clear with respect to that. First of all, you know, I refer that you, I think that you refer to the, to the issue of the debt cancellation, you know, for sovereigns. Well, debt cancellation is, first of all, it's illegal according to the, to the, to the, to the treaty. And so, you know, it could not be possible. It could be considered, you know, monetary financing. And so I think that, you know, is something that from the legal standpoint is out of the question. But secondly, I think that, you know, I would like to go as well to the question of the rationale, the economic rationale, you know, that cancellation doesn't make any sense now. Doesn't make any sense because what we are trying to do is to maintain financing conditions, you know, at very favorable levels. And I think that the cancellation could have, you know, different, different, you know, an impact that could undermine, you know, all the systems that we have, we have, we have in place. I think that, you know, to pay back, you know, debts is key in order to maintain confidence. And, you know, because you cannot, because if you start in a sort of, you know, dialogue with respect to the restructuring the debt, I think that, you know, at the end of the day that what you can do is to infer the future issuance of debt because confidence is going to be undermined, is going to be damaged. So, you know, to be, you know, to summarize from a legal standpoint that cancellation, that forgiveness is not possible. And secondly, even from the financial or economic rationale, I think that it could be a big mistake just even, you know, to pose this kind of questions because at the end of the day what you are doing is undermining the confidence in the whole system.  And I think that one of the consequences that we're going to have that is totally unavoidable is that the public debt ratio of some countries, of all the countries is going to increase, is going to go up. But that's the consequence of having, you know, fiscal policy as the main line of defense. There is no alternative to fiscal policy and to an increase in fiscal deficits and to an increase in public debt ratios. But once, you know, the pandemic fades, once the pandemic is over, I think that, you know, the different governments will have to pay attention to fiscal sustainability. We're going to have an environment of very low interest rates that I think that is going to be, you know, helping hand in order to guarantee sustainability of the public debt.  We hope that we will recover, you know, growth in the different countries.  Yes, thank you, Mr Svaz. So I have a long list now, meanwhile, from questions. So I think the next one would be Mr Tuft, Nicholas Tuft. Yeah, thank you. Hello. Yeah, I've got a question. You raised the, or you said before that fiscal policy is sort of the first line of defense against this pandemic. So at least for Germany, the state has provided a lot of liquidity to businesses and has even changed the bankruptcy rules for some time. My question is, are you expecting more instability from that front once those measures run out? So maybe is the true monetary shock of the pandemic sort of delayed and still to come? That would be my question. I think that this is a good point because, you know, you're referring about the facing out of the different measures.  And I think that you need to have, you know, let's say a very balanced approach. On the one hand, what you need to, if you withdraw very rapidly, you know, for long schemes or the public guarantee schemes, you are running the risk that, you know, you will enter into a sort of cliff edge effect. That you will stop, you know, the recovery. On the other hand, if, you know, the measures are in place for a long period of time, you can give rise to let's say some issues of moral hazard and zombification of the European economy. So I think that is very important to do it in parallel, to do it, you know, at the correct pace. I think that, you know, I would urge, if I were, you know, a person with responsibilities on the fiscal side, on the side of, you know, maintaining, you know, these measures are a little bit longer, because I think that the main risk that we can run if you withdraw very rapidly, you know, the measures that you have put in place is that you can stop the recovery and to have, you know, a new deep in economic activity. That could be instrumental. So it could be very prudent, but simultaneously, you cannot have, you know, these measures in place forever, because otherwise, but you are going to give rise to moral hazard situation and, you know, the problems in terms of zombification. I think that you allow me to say, I think that we have to try to avoid zombie companies. And what we have to try to help is what I would call, you know, sleeping beauties. Companies that are viable, and that we know that are suffering because of the pandemic, but once the pandemic is over, they will be viable again. I think that is not easy. It's not simple. But I think that we should try to have, you know, a quite balanced approach with respect to that. Yes, thank you. So I think I asked Florian Diknek, who also raised his hand. Thank you. Yeah, we were talking about Metro potential regulation and he said that it's very important to keep the flow of credit alive. And that the drawing down of liquidity buffers for banks was actually quite helpful. So my question is we, we, in like until April we saw a huge outflow from investment funds so from non banks, which do intermediates also a fair share of credit and the European area here. And then the question is, I mean, it was prevented the outflows by a huge buying program of the ECB yet going forward. This is a risk that still is there. So are there any plans to address this in the future? Well, you are totally right. I think that, you know, sometimes, you know, in Europe, you know, we are, you know, too much focused on banks, because the European economy, as everybody knows is much more bank based. than the US economy, for instance. But if you look at the evolution of the numbers, mainly over the last decade, what you can see is that now, you know, the volume of assets under management in the non bank industry. You know, it's even higher than the volume of the balance sheet of the aggregate level, and the great volume of the balance sheet of the European, the European banks. And you are totally right that, you know, they are playing a very important role in funding economy in concrete, very concrete sectors. No, but, you know, they are now, you know, an important source of funding. Well, banks are regulated entities. It's totally supervised. Well, you have the SSM, you have, you know, supervisors everywhere, regulation with respect to liquidity, to solvency, to corporate governance, a lot of things, know, a lot of regulations with respect to banks, no. But simultaneously in the case of the non banks, the situation is a little bit different. They are not as supervised as, you know, the banks and, you know, they do not have any sort of market potential policy in place. So we had, you know, difficult moments in March in terms of outflows of, you know, some, some investment funds.  Well, the level of outflows was very, very, very relevant in not only in the States, but as well, you know, in Europe. And one of the segments that was hardest hit was the money market fund industry. Theoretically, you know, money market funds are very close to cash, you know, it's an alternative to the positive, you know, cash in a bank.  So here we realized, even in the case of the money market funds that they have to invest in that very, very short-term and very liquid assets. You know, there was the potential of a mismatch or a disconnection between redemptions, you know, the disposal of the assets in a moment of turbulence, in a moment of turmoil. So I think that now at the international level, and I think that this is relevant, at the level of the FSB, the financial stability board that is, you know, let's say a global, you know, regulator, regulator, you know, I would say a global forum, you know, for analyzing potential financial risks, we have started to work in order to have in place macro provincial policies for mutual funds. This is going to be a big change. This is going to be a big change. But for instance, you know, to have, let's say, ex-ante macro provincial measures to force, you know, you know, the investment funds, the mutual funds to keep a certain percentage of their portfolios in very liquid assets just to meet, you know, the redemptions that they could have. Well, these kind of things, I think that now are evolving, because as you have said before, you know, they are becoming even more relevant than the traditional banks, and simultaneously, simultaneously in terms of the funding of the economy, well, you know, they are playing a role. And they are extremely interconnected with the rest of the financial system. So if you have a problem, you know, in a fund, in a relevant fund of liquidity, you know, I think that we have to bear in mind the possibility that, you know, these problems immediately will spread to the rest of the financial, the financial, the financial system. That's why, you know, to have a macro potential toolkit for investment funds is so important. I think that is high in the agenda of, you know, the global regulators. Okay, thank you. So the next question is, I think by Nicholas Ego. Yes, so thank you for this nice event. And yeah, I have a question actually a follow up question on what you just referred to. So before the crisis, the ECB already ran the stress test or so called stress test for banks in order to model different crisis scenarios. So now the corona crisis hit. And the first question was the corona crisis now actually more severe than the before modeled scenarios. And if yes, fast, can the banks now be sufficiently capitalized. Also, if yes, how, yeah, let's say suitable is this whole tool of stress tests, if in the end, yeah, they are not, let's say, hard enough for the reality to come. You're asking about the stress testing that I think that is one of the, of the main instruments at the disposal of supervisors and regulators.  So, well, if we have been told one year ago that we could have, you know, a crisis as the one that we are having now, for sure that, you know, everybody could be, you know, quite skeptical, because this was totally unprecedented.  But I think that an unknown of this, you know, this caliber, you know, it was a thing that, you know, unthinkable. But it has taken place, you know, just to give you. So, you know, the brain principle of the stress testing is that you try to analyze how reluctant, how resilient, excuse me, the banks. The banks are, you know, confronting the banks with, you know, a very, very, very harsh, very, very, very difficult, very severe scenario. The one that we had, you know, in March, because of the pandemic, I think that, you know, it was totally unprecedented. But, you know, what you have there, you know, is a very important decline in GDP. You have an impact on the price of real estate. You have, simultaneously, you know, it's always that we are considering now the possibility of, you know, a very low interest rate environment for a long period of time, because you know that this is not, this is, you know, something that is relevant for the, for the, for the banks.  We did that in June. It was not the traditional stress test exercise. It was, you know, what we call vulnerability analysis, because in the case of the stress test, you have two different approaches. You know, the bottom up that is the usual one is the one that we are going to carry out in 2021 and the ones that you have, you have seen in the past, you have, you have had in the past. That is bottom up. You give the scenario to the banks and you see bank by bank, the impact that, you know, this very severe scenario is having on the PNLs and the balance sheet and the solvency of the banks.  That's the typical one. But in June, what we did is what we call, you know, a vulnerability analysis. It was top down. We take our models that we have in BCB. We introduced the shock that was very, very severe, more severe than the severe scenarios of the traditional stress test. And we tried to find out, you know, the potential outcome in terms of capital depression from the banks. And perhaps, you know, there were several, several conclusions. The first one is that, you know, in the baseline scenario that is very similar to the one that we are having now and that we are projecting. Well, capital depletion would not be, you know, very, very, very high that banks could perfectly withstand, you know, the impact of this pandemic, always according to the models. But, you know, in the very severe scenario that, you know, the main difference with the baseline scenario was that the recovery was much, much, much less intense. And it took longer to go back to the pre-corona GDP levels. In that case, you know, capital depletion was important, was relevant, was in the area, if I remember correctly, in the area of 400 basis points. Always, if you allow me to say, and this is something that sometimes we overlook in finance and in economics, you know, the problem is not as much, you know, the average impact, but the dispersion of the impact. Standard deviation matters, in my view, as much as, you know, the average. Dispersion is very, very, very, very important. And the problem was not that well, you know, the impact was big in both cases. But the question is that not all the banks are identical. Not all the banks have the same business model.  That is something that they can, they can, they can, you know, resist and they can withstand perfectly because the average capital ratio was above 14%. But, you know, that was the average. Then you have some, you know, let's say, I would say outliers with lower capital, capital, capital basis that, you know, could suffer. And, you know, if some banks, you know, the benefit of the issues that is very important in terms of supervision is that you have to try to avoid the perception that the whole system is damaged because some pieces of the system are suffering. But to summarize, you know, now with the vulnerability analysis that we have, that will take into consideration a very, very, very tough scenario, even much tougher than the one that was used in the stress test of 2019.  And, you know, the main element to take into consideration, it was the issue of dispersion that not all the banks are in an identical position.  So we already had a lot of questions which go deep into details of financial market issues and stability. Of course we can continue, but I also hope that we at least maybe next part, we can also address issues which are more say at the heart of monetary policy discussions on say price stability and so on. But nevertheless, I have a list still of questions I think we have to go through in any case. The next one is by Fabian Böschleger. Thank you very much. It might be a little bit of an older topic, but I would like to know what is your opinion about the European Commission vetoing the emerging of big banks in Europe. I'm thinking especially about the recent declined merging of Deutsche Bank and Commerz Bank. And if you would think that the creation of national champions through mergers and acquisition would make the banks sector more resilient and profitable. Well, as you can imagine, I'm not going to enter into any sort of concrete deal. But if you allow me, I would elaborate a little bit the starting for one issue that I stressed and I highlighted at the beginning of my intervention that is the low profitability situation of the European banks. Why that's important? That's important because if you have low profitability, you are going to have low valuations and you're going to have difficulties to raise capital in the markets and to generate capital internally, organically. So what are the reasons behind this low profitability? For instance, to give you some numbers. Before Corona, the return on equity of the European banks on average, always on average, there was dispersion as you can imagine, was in the area of four or five percent. And the cost of capital required or demanded by additional investors in the banking industry was close to ten. So when you have a business that produces a return on equity of four or five and your investors are asking for something close to ten percent, the way out immediately is to have a price to book that is clearly below one, that you have an important discount with respect to the book value of the European banks. So that's to give you the reason behind the low valuations. You have a big gap between the return that you can obtain on average and the cost of equity that the institutional investors are demanding to the industry. So having said that, what's the reason this very low profitability of the European banks? I think that there are structural factors. There are the cost structure of the banks. There are, you know, a situation of very clear excess capacity of the banks. You have also, you know, the potential, let's say, competition coming or rivalry coming from fintech or the big techs that are going to be there. So that retail banking is going to be a very difficult business over the next years. So you can do several things. The first one that you should do is to try to reduce your cost structure to invest in the utilization and to try to become competitive that way and to try to increase your profitability, your return on equity. And one avenue in order to do that is, you know, to have consolidation, to have a merger. Because when you have a merger, what you can do is to start, you know, you're going to have, you know, economies of scale, economies of scope, and you can reduce, you know, the cost structure of the new entity. So consolidation is not, let's say, it's not a goal in itself. It's an avenue in order to try to reduce, you know, the excess capacity, the excessive cost structure, excessive cost to income ratio of the European, the European, the European banks. It could be ideal to have cross-border consolidation. We are not seeing cross-border consolidation. We are only seeing, you know, domestic consolidation in the case of Spain, in the case of Italy. You have some transactions and some deals, some mergers, you know, now in the pipeline. But, well, this is something that we have to think about. Why don't we have cross-border consolidation in Europe? I think that it has to do with, you know, the completion of the banking union. It has to do with some specific and particular, you know, regulations in concrete countries and difficulties to capture, you know, this economies of scale, this economies of scope. But, you know, the message I repeat is, you know, low profitability of the European banks. They need to act rapidly to correct that situation because it can give rise to problems. For instance, if you have very low profitability, a bank always will have the tendency to underprovision. And, you know, that could give rise.  So, these are the issues that we have to address at the European level. I think that to complete banking union could be key. And I think that, you know, because, well, theoretically, we have a single supervisor. We have a single monetary policy. We have a single solution entity in Europe.  We have a lot of domestic banks. And I think that this is something that, you know, should be addressed in the near future. Okay. Thank you. So, the next question I think is from Fabian Knap. Hello. My question is related to the default rate of bank loans to corporates or firms. Don't you think that when the longer lockdowns in several countries at the moment last and fiscal stimulus is faced out slowly? Don't you think that there will be one point in time where there's a big increase in the default rate because all the defaults in the last month has been delayed?  There is something that is quite obvious, you know, this, despite all the measures that we have taken, this is a very big crisis. And big crisis have impact. We have, you know, reduced the impact of the crisis, but we have not avoided the impact of the crisis.  You will need something between in the area of two years. So you have lost two years and you have, you're going to have structural scars. I refer before to the public declaration, but also to the corporate to the corporate leverage to the corporate declaration. So this is going to be a reality. And that's why, you know, non-performing loans will be otherwise over the next, I don't know, you know, over the next year. We have calculated that, you know, in the worst case scenario, you can have an increase in non-performing loans that was close to 1.4 trillion euro. So the crisis is going to be there. So what you have to do in order to deal with that situation is, first of all, to make, you know, the banks much more resilient. And there is something that is quite obvious. If we avoid a great crunch, at least something that so far, you know, we have avoided, then, you know, viable companies that were viable before, you know, corona will continue being viable in the future. You have to focus the efforts as I said before, you know, and those companies that, you know, are viable.  But anyhow, we are going to have, you know, a drop in non-performing, a decline, an increase in the non-performing loan situation. That's for sure. That's why, you know, to have, you know, the banks much more capitalized than in the past is something that is relevant. But the impact is going to be, it's going to be, it's going to be there, no? Because this crisis has been, has had, you know, intensity that it was totally unprecedented in comparison with the past. Yeah, thank you. The next question is in the form of Tobi Abogast. Yes. And I apologize up front for throwing around with some technical jargon. I just want to avoid getting a textbook answer or something that I can find on the website. And I've worked with the Buddhist thing myself, so I know some of these answers. And my question relates to the neutrality of monetary policy, especially in the background of the new program, PEP, etc. And I'm referring here specifically to the studies showing on hysteresis effects or the permanent effect of financial crisis, Claudio Borio, even the IMF, you know, issuing this mea culpa on fiscal austerity. So there's a lot of evidence also that distributional matters, wealth inequality, etc. They don't matter only in the short run where supposedly monetary policy is responsible. But they also have an impact on the long run where so far the consensus is this is not the realm of monetary policy. The central bank just minimizes the loss function inflation targeting price stability. But now we know that there's a lot of problems coming from empirical studies and also theoretical work where the natural rate of interest or unemployment, the output gap, they're all unobservable, are quite important for retaining this neutrality. My question is this, is there any rethinking of the neutrality of monetary policy in the long run, and I'm referring not to inflation, the negative effects of inflation, referring to a broader non neutrality. And if it's still retained what's the basis of sticking to that, is it really still the old Lucas rational choice theory of long run neutrality of money and hence also monetary policy. Well, this is a very, let's say, theoretical question, but a very good question. I think that is the core of monetary policy implementation over the next years. Well, here, I think that you're referring to the question of the neutrality of money over time. I can give you my personal impression, my personal view. I think that money and monetary policy in the long term only affect nominal variables, not real variables. So real variables, in my view, are determined by other factors.  I think that in the long term, they determine, you know, what is, it could be, you know, the growth in the medium and long term growth potential, that at the end of the day is going to be determined by productivity. Productivity is going to be the factor that is going to be translated into potential growth in the medium term. What I think that is important is that, you know, in the meantime, until we reach, you know, the long term, monetary policy has real consequences. And it has real consequences in terms of, you know, the impact, you know, on credit, mainly.  That's the intention of monetary policy. In that respect, for instance, my potential is quite relevant in order to try to tame and to, you know, to smooth the evolution of the credit cycle in order to minimize the potential impact on the business cycle. Having said that, you have to bear in mind that if you look at the European Treaty, you will see that, you know, our mandate is price developing. But I think that is quite important, you know. And, you know, the definition of price stability that we have now is, you know, below what close to the percent, because you need that definition in order to do that, you know. So we have to be focused on that. But simultaneously, when we take our decisions in terms of monetary policy with the main focus on price stability, we are also considering other kinds of potential reverberations of our, or impacts of our policies. For instance, financial stability, for instance, you know, if, you know, the impact on the business cycle, the impact on activity, we based our decision on two pillars. The first one is the monetary pillar, that is, you know, the evolution of credit, the evolution of, you know, the amount of money, the quantity of money, and the second pillar is the evolution of the economy. So to respond to your question, that I think that is something that is going to be part, this is going to be the core of our strategy review that we have undertaken and that we expect to finalize next year. I would say that we will continue, you know, our main goal is price stability. We are continuously looking at our inflation, our inflation projections over time in order to take our decisions, but simultaneously, we have to bear in mind that, you know, that, you know, this is not only going to affect, you know, price stability is going to affect other variables. And I think that question of, you know, quality is something that is quite relevant. I think that this is going to be part of the political debate that we are going to have. If you want my opinion, well, because monetary policy, you know, is a blunt policy in the sense that you cannot fine-tune the policy. In that respect, I think that the question of equality has to be addressed much more with fiscal policy. With fiscal policy, you can target, you know, much more. You can go to the concrete, you know, situations that you deemed that are not, you know, the correct ones. You can spend much more on education. You can spend much more on research. You can spend much more, let's say, even in climate change, in the fight against climate change. You know, simultaneously, you have the taxation. And taxation, well, you know, they have to produce the correct incentives in the economy. But simultaneously, you can reduce, you know, the potential gaps in terms of, you know, of wealth, in terms of income among the different societies.  There is another debate going to equal to equality.  And so, you know, assets are owned by affluent people.  And the recovery gave rise to employment.  So, this debate is going to be there. It's something that I do not, I don't ignore. I think that is something that we should take into consideration. But, you know, I think that we should have also, you know, our last approach and to put both the pros and the cons of our actions. So, for the fight against, you know, inequality, I think that is the main reserve role. This is the role of fiscal policy. And simultaneously, you know, I think that in the case of monetary policy is not the correct instrument to do that. But we have to be aware of, you know, the potential side effects that our policies might have. Yes. Thank you very much for the question and the answer. So, next question is by Nick Toyster. Yeah, good afternoon, Mr. Gooders. Thank you for this opportunity. And I'm also interested in how the ESB ACB deals with the fundamentals of theory, and in particular with this upcoming modern monetary theory. And are there scientists that consider this theory as realistic at the ECB or do you stand all in line and say, okay, that's not how the financial system works and we should definitely not rely on quantitative easing alone. Or are there maybe scientists that say, yeah, we should do a lot more of quantitative easing and, yeah, that's going to be the future. Or how are the scientists at ECB thinking? Thank you. Well, first of all, what I have to say is that the modern monetary theory is not so modern. It's quite old. It's based on the principle that a central bank of a country can create money, all the money that they want.  So this has been there, you know, even since the middle ages, because, you know, perfectly, that, you know, if you create too much money over time, sooner or later you will have inflation. And as I have said before, you know, the amount of money cannot create wealth, cannot create employment in the long term. Employment and activity and growth are determined by other variables, determined by productivity. There is something that, you know, is a phrase that I like to repeat. Monetary policy is not all mighty. We are not all powerful. We have not the philosopher's stone. So you can have an impact, you know, in the short term, in the medium term, over the variables you can smooth, you know, the business cycle. But in the long term, you know, are real variables the ones that are going to determine, you know, the potential wealth of the economy. And at the end of the day, you know, the welfare of the population of a country. So that's with respect to modern, but, you know, you make a reference to QE that I would like to perhaps, you know, let me aside the question of, you know, the modern monetary theory, I would like to elaborate on perhaps to clarify a little bit. The traditional implementation of monetary policy policy was that you determine, you know, in the short term, you know, the interest rates, the short-term interest rate. So you move up or down the short-term interest rate, as a central bank, and immediately you have an impact on the term structure of the yield curve. You affect the whole yield curve. That was, you know, the traditional way of, you know, the implementation of the monetary policy, the one that is always described in the economic theory books. But what's, you know, the issue, what's the reason behind that, you know, central banks, all the central banks of the world are moving away from this traditional, you know, approach in terms of implementation of monetary policy and going much more to, let's say, to unconventional and orthodox, you know, monetary actions like QE that you have got, the deficit that you have referred. I think that there is a factor behind that, I think, that is very relevant. Is the continuous decline over the last two decades of the natural interest rate? The natural interest rate is a real variable. It's not a monetary variable. The real interest rate is that level of interest rate that, you know, balances savings and investment. And what we have seen over the last, let's say, two decades, more or less, is that this natural interest rate has been declining over time. Why, you know, globalization, I think that it has been quite important. Demographics, even technological progress are reducing, you know, this natural interest rate.   And what we see now is that, you know, this natural interest rate is very close to zero.  So, you, on top of the natural interest rate, you put your expectation, your inflation expectation. So, if you have the natural interest rate of 2% and your, you know, your projection of inflation is 2.5%, then what you will see is that nominal interest rates are in area 4.5%. But if the natural interest rate is close to zero and your inflation expectations are very moderate, then the nominal interest rate will be very, very, very, very low. And that's why, you know, that reduces the leeway of the traditional monetary policy. If that's the situation, you know, you're going to hit the lower bound of, you know, the interest rates, that is the zero level, much more often than before. So, in order to continue, you know, implementing and executing and pursuing your monetary policy, you have to go through other instruments. And one of the instruments is the QE, is the Partz's programs. Because with the Partz's program, you can influence the whole, you know, range of the yield curve. So, I would like that, you know, this is something that is difficult to understand, because it's a big modification of the way that monetary policy is implemented. In the past, when the real interest rate was much higher, it was quite easy. But now that, you know, you are going to be very close to the lower bound much more often than before, then you need to go to other alternative instruments.  That's the reason behind. But the reason behind, you know, the implementation of the monetary policy is, you know, the drop, the decline, the secular decline that we have seen of the natural interest rate. Yeah, thank you. So, I think this is important also to explain, not only here in this place, but also maybe also in my lectures and somewhere else, differences between the approach that we typically view from how a central bank works with these instruments on the one hand side and what we have nowadays in the last 10 years have seen with regard to asset purchase programs. And when people sometimes shortcut this analysis and talk about modern monetary theory, which is, I would say, not a very sophisticated way to be concerned with the mechanism and the instruments of the central bank. That's a lot, Mr. Dingindos, for that. But we have a few more questions on the list. Even time is running up. Maybe we can take one more question. Sure. No problem. There's a question by Franz Lenard. Well, yes, we have talked already about the depth of the states, the new debt due to corona. We've also talked about the zero percent interest. That's, well, for the moment. And now my question would be, now that all Europe or nearly all European countries are crashing through their debt ceilings, does that mean that for the next decade, the one percent interest will have to stay in order to allow the states to lower the debt? Or are there other solutions that could avoid zero percent interest? Well, I think that, as I referred before, there are other solutions. I said fiscal is the first line of defence, is that the way you have to act immediately, taking into consideration the intensity of the crisis that we have suffered. We are going to have a legacy. The legacy is going to be much higher than the public debt ratios, and with big disparities among countries in the euro area. So, while the pandemic is over, and if you have used the fiscal policy correctly, you will reduce automatically your fiscal deficit. You will have a recovery because we are totally sure that once the pandemic is over, once vaccination has even risen to herd immunity, we will see an important recovery of activity. It's something that we saw, for instance, in the third quarter of this year, when the containment measures started to be raised, immediately the activity started to go up very rapidly. And the countries will find that the fiscal deficits will reduce, that nominal GDP and real GDP will go up, but the public debt ratio will be higher. So that's why the way to deal with this situation is to start to reduce and to start to trigger a decline of the public debt ratio to come back to fiscal sustainability issues. There is a question of, let's say, dying consistency. In the short term, fiscal has to be focused on the pandemic and the consequences of the pandemic. You should not try to use this situation in order to foster or to increase structural deficits. It's always a temptation that politicians have. So, be focused on health for long schemes, public guarantees, the real instruments to deal with the pandemic. Once the pandemic starts to fade away, those expenditures will start to be reduced. You will have a recovery, and finally, eventually, you will find that you have a higher public debt ratio. And in that moment of time, fiscal sustainability will come to the fore and will be part of the public debate. Thank you. I see two further questions. Is it okay for you? No problem. I am very happy to talk to you. Thanks a lot. So, the next question is by Jonas Czarnik. Yes, so I want to touch on a topic we haven't emphasized that much, which is climate change. So, you said that the central bank is not almighty, but I have the feeling that policymakers at the ECB believe that it's best suited to address climate change than governments. Why do you believe so? And then why does this not undermine the credibility of the bank? Well, this is a good question. Climate change is something that is quite relevant. It's going to be another person in our daily lives. And I think that the fight against climate change is going to be one of the main policies of the European Union. Well, let me say something. First of all, the main institutions to deal with climate change have to be the governments. The main and the most powerful instrument to reduce carbon emissions is to have attacks on carbon emissions. So, we are not regulators. We are central bankers. So, the governments have a real responsibility to deal with the reduction of carbon emissions. And I think that the main instrument to do that is through taxation. That's very clear. But simultaneously, and perhaps this is the point that I would like to make, climate change is going to be part of the work of any central bank. First of all, because we are responsible for financial stability, and climate change is having an impact on financial stability. When you look at the balance sheet of the banks, you see that there are exposures to corporates that are going to be affected by the transition to a green economy. And this is something that we have to take into consideration. That's the first point. Second point, because climate change is going to have an impact on the outlook. It's going to have an impact on inflation. It's going to have an impact on growth. Even, you know, if you impose attacks on carbon emissions, and you do what you have to do, this is going to have an impact on inflation. And inflation, as you know, is our mandate. And finally, let me say something that as well is very, very relevant for us. If climate change, if climate change related risks are going to affect the solvency of the different corporates, and we purchase, you know, in our programs, we purchase, you know, securities issued by these corporates, it's very important that we take into consideration this climate change related risk that can have, you know, an impact that can, that can incur, that can damage, you know, the solvency of these issuers. How are we going to deal with that? We are going to deal with that, you know, trying to convince rating companies, because what we use, but whenever we buy a security bond, we look at the rating, you know, that, you know, we have to buy a buffer, you know, investment, investment rates and that we cannot buy below investment rate. But I think that when you analyze the rating companies, we'll have to analyze, you know, how, you know, the kind of change related risks affect the solvency of these companies. And that will be taken into consideration by us. So indirectly, you know, climate change is entering into the way that we implement our monetary policy and our purchases. So there are different dimensions, you know, we are not the main actor. The main actor is going to be the banks, but simultaneously, I think that we can make a contribution. And I think that that contribution could be, could be relevant in several, in several aspects. I have referred to you in three concrete aspects, but I think that there are even, even, even more. Yeah, thanks a lot. So there's one further question by Florian Herst. Yeah, hi. You mentioned your main goal is price stability. And for definition, it's 2% inflation. Do you think the crisis will change the goal? And don't you think it's controversial that you just change the goal and say it's, and say the price is still stable? In my head, it's kind of controversial. So our mandate, as you have said, is price stability, and you have to operationalize to define what the price stability is. In the history of the ECB, we have had two definitions of price stability so far. The first one is below 2%, the second one, after 2003, if I am right, if I remember it rightly, is, you know, below, but close to 2%. And now we have launched our strategy review process. The strategy review process, one of the issues that we are going to look at is the definition of price stability. I would say that, well, now, for sure that if I, if you want my opinion, I think that monetary policy is not about revolution, it's about evolution. So, I think that our definition of price stability can be modified. It's something that the covering council will decide before the end of the strategy review period that is going to be, you know, meet next year, or even in the third quarter of next year. But it will not be, you know, it will not be a revolution, we'll see what we have now. I think that's much more important than the definition of price stability estimates that we are going to use to deliver. Because so far, if you look at the evolution of the inflation rate in Europe over the last 10 years, what you will see is that both in terms of headline and in terms of underlying inflation, where we are clearly below 2%. So, there are aspects, there are structural, you know, frameworks that have been raised or the action of the inflation rate. The traditional Phyllis Curve models, they do not work as they used to work 20 years ago in terms of trying to determine, you know, what's going to be the inflation according to the monetary and the fiscal stimuli that you have in place. But, well, the definition will be there. It's not going to be, you know, it's not going to be a revolution with respect to the one that we have now. It will be an evolution. But I think that the big discussion of our study review is going to be about the instruments. Thanks. So I think this was more or less a nice last question, which was more of a big picture question. So, because we went back to the main goal of the ECB was regarding price stability. So as far as I can see, I have, I don't have any further question on the list. So, I think therefore, if there's no further question, then I would like, first of all, to thank you, Mr. Indus. So it was pleasure for us. It was great to learn so much about different aspects. In particular, in the beginning, we talked a lot of financial about financial markets or that was fantastic. So I think we had very valuable insights here from you with regard to ECB policy and also the overall picture regarding financial markets. And thanks, of course, also to our participants for your questions and also for listening to the discussion. I think it was really worthwhile to listen to all these explanations and questions and discussions. So that was great. Yeah, thanks. You can see now, I think it's from Catherine or from Felix, you posted now this the slide. I would like to ask all participants, it would be great if you can give you give us some feedback on this format and the discussion and the way we discuss these issues here within this meeting. And so please go to the link that you can see here on the slide, and please fill out the form so that was we would be very nice so to get some feedback from you. Other than that, I have to say, first for me, great pleasure. I would like to have some similar format again in the future, hopefully not online, hopefully live, and maybe also then again at the University of Cologne. And so today we essentially just talked about some of 19% of the discussion was just on the pandemic. So maybe the next time when time allows and you can come around again. I would like to address other issues, which are also very important and relevant, maybe later on after we are through this pandemic, we would like to talk about other things. So, once again, thank you very much. Very interesting. Thank you very much. Thank you. Merry Christmas and Happy New Year. Yes, wish you all so very nice Christmas days and Happy New Year. Bye bye.


Personal Finance PowerPoint Presentation Flexible Spending Account FSA Prepare to get financially fit by practicing personal finance Insurance is part of our long-term risk mitigation strategy where we follow the adage of measure twice, cut once, put in a formal process in place, looking something like set in the goals, develop a plan to reach them, put the plan in action, review the results, repeat the process periodically. Most of this information can be found at Investopedia, Flexible Spending Account FSA, which you can find online. Take a look at the references, resources, continue your research from there. This is by Michael P. Scott, updated January 13, 2022. In prior presentations, we've been taking a look at insurance. We then moved to the medical insurance, and now we're thinking about the FSA in alignment with those discussions. What is a flexible spending account, an FSA, you might ask? A flexible spending account, an FSA is a type of savings account that provides the account holder with specific tax advantages. An FSA is sometimes called a quote flexible spending arrangement, end quote, and can be established by an employer for employees. The account allows you to contribute a portion of your regular earnings, employers can also contribute to employee's accounts, distributions from the account must be used to reimburse employee for qualified expenses related to medical and dental services. So you're putting money into the FSA. Why would you do this? So you're taking money, it would be most likely a withholding, for example, from your W-2 or from your wages or possibly provided by the employer that would then be going into the FSA. Why wouldn't the employer just give you cash? Why not just give you the money? And then you could spend the money on your own medical expenses because they're trying to have some kind of way to get a benefit that has a tax advantage. If you could get a tax advantage, it's beneficial to both the employer and the employee because the money that the employer is giving to the employee may be able to go further due to the ability to have the tax advantage. Why would the government want to do this? Well, now you're putting money into an account that's for a specific use. So they're trying to gear you or try to get you to do more preventative care, for example, by spending the money out of this account on certain things. So you're restricting the money. If you just got the money, of course, you could do whatever you want with it if it was outside of the FSA, but it might be subject to taxation. If it goes into the FSA, then you're going to have to spend it on stuff that qualifies for it in order to get to the tax benefit, which is going to be for some kind of medical expenses. So another type of FSA is a dependent care flexible spending account, which is used to pay for child care expenses for children age 12 and under and can also be used to pay for the care of qualifying adults, including a spouse who cannot care for themselves and meet specific internal revenue service IRS guidelines. A dependent care FSA has different maximum contributions rules than a medical related flexible spending account. So you want to make sure that you're inside of the rules for the FSA. It could be a little bit confusing to do this, but might be worthwhile if you can get some tax benefits, some tax savings from it. So a flexible spending account and FSA works how it works. One of the key benefits of a flexible spending account is that the funds contributed to the account are deducted from your earnings before taxes lowering your taxable income. So when we think about taxes, income taxes, everything's flipped on its head. Everything is in reverse. Another word meaning we usually think of income as good, but for taxes, income is bad because it's an income tax and the tax, the income, if we have more income that's taxable, they're going to tax us on it. So if we can have stuff that's given to us income that's given to us that's not taxable, then that would be good. And that's what the benefits kind of programs can come into play. So as a result, regular contributions to an FSA can reduce your annual tax liability. That's the point. The IRS limits how much you can contribute to an FSA account per year for medical expense FSA account. The annual contribution limit per employee is $2,750 for 2021 and 2,850 for 2022. If you are married, your spouse can also put aside up to the annual contribution limit through their employer. Employers can choose to contribute to an FSA, but they do not have to. If they do, their contribution does not reduce the amount that you are permitted to contribute. You are not taxed on employer contributions. So if you think about the money that's coming out of like your W2, your paycheck stub, you would think that if you're paying for it, then you'd have your gross income and then you'd be taking the money out like kind of like a withholding similar to Social Security, Medicare and federal income taxes, which would be going to the FSA or the employee or can count it like they're putting the money in over and above the salary. The salary so it wouldn't be part of the withholding. It would be the employer contribution. So for 2021, the contribution limit for a dependent care FSA is $10,500 for joint and individual tax returns and $5,250 for married taxpayers filing separately and increase given through the American Rescue Plan of 2021. For 2022, the contribution limit returns to $5,000 for joint and individual tax returns and $2,500 for married taxpayers filing separately. Advantages and disadvantages of flexible spending accounts FSAs. The funds from an FSA can be used to reimburse payments for medical care, which is defined to include amounts paid for diagnosis, cure, mitigation, treatment or prevention of disease or ailments affecting any structure of the body. However, expenses for surgery for cosmetic purposes and for items or services that are just beneficial to general health, such as a gym membership are not reimbursable. So obviously when you start thinking about these kind of benefit programs and you're saying, OK, I've got money in the FSA. Obviously I want to put the money in the FSA because I get a tax benefit from it, but now it's stuck in there. What can I spend that money on that's going to be a qualified type of thing? And you can get into, OK, it's got to be the medical kind of stuff. But then people get started to get creative and say, well, what if my medical, my doctor said I should go to the gym? How about it should be part of my gym membership and stuff like that? And you can see we're going to have to draw lines and get a little bit confusing when people are going to try to get creative. But qualified medical expenses for FSA owners, their spouse and dependents are covered. Medical equipment purchases, such as diagnostic devices, bandages and crutches and crutches are covered by FSA. Expendices for prescription medications, including over-the-counter OTC drugs for which you had a prescription as well as insulin can be reimbursed with FSA funds. The Coronavirus Aid Relief and Economic Securities CARES Act, enacted in 2020, expanded reimbursable qualified medical expenses for 2020 and later years to include the cost of over-the-counter drugs without a doctor's prescription. The Act also permitted the US, the use of FSA funds to reimburse the cost of menstrual care products. Both of these CARES provisions are permanent. Funds in a FSA may also be used to reimburse amounts paid in accordance with insurance plan deductibles and co-payments for medical services. Unfortunately, the money may not be used to pay for insurance premiums. So that would be the big one. You're probably thinking, what about the insurance premiums in here? So we got the special considerations. The money set aside in an FSA generally must be used by the end of the plan year. However, a plan can offer a grace period of up to two and a half months to finish using that funding. If that option is not taken, a plan may allow you to roll over up to five thousand five hundred and fifty five hundred and fifty dollars per year of unused funds from your account. Neither option is required, but only one may be offered by the plan. So it get a little bit confusing when you start to say, OK, how much can I put into this plan? What can I use the money for? What happens if I don't basically use the money in the plan? Obviously, all this is set up in an attempt to get some tax benefit from it. So when the year ends or the grace period expires, any funds that remain in your FSA are lost. Thus, you should carefully calibrate the amount of money you plan to put into your account and how you intend to spend it over the course of the year. So it's one of those things you really got to keep an eye on so that you're maximizing your benefits as you as you put the process in place. So the Internal Revenue Service has announced that because of the impact of COVID-19, it will permit but not require employers to amend health plans so that employees can change elections that usually are allowed only once a year. Also, the IRS will allow employer discretion to amend FSA plans for 2020 and 2021, either to allow employees to carry over more than the current $550 maximum or to extend the grace period for using unspent FSA funds through December 31st of each year, a different type of FSA, a quote, limited purpose flexible spending arrangement in quote, that's the LP FSA. A little bit different refers to a saving plan that can be used with a health savings account HSA, unlike a standard FSA. Employers may use an LP FSA to in conjunction with an HSA. Contributions are made using pre-tax earnings. A limited purpose FSA is more restrictive because the arrangement is reserved for paying dental and vision expenses and sometimes other costs incurred in a high deductible health plan. That's the HD HP after the plan holder meets the deductible. So we've talked about this in prior presentations when we talked about different kinds of health plans, noting that the high deductible plan is usually the kind of like the cheaper plan that might you might use if you're more healthy and or if your income is lower and so you want the lower premiums and then the law came in and said, well, if you have the high deductible, they want to incentivize you to do the preventative stuff. So that's when we have this HSA discussion coming to place, which we might take a look at a little bit more in the following presentations. So how much should I contribute to my FSA? No specific amount is correct for everyone. And FSA elections vary depending on the particular situation of an individual. Make your election by carefully examining your expected out-of-pocket health care expenses for the upcoming year. So if my spouse is enrolled in a different health insurance plan, what happens then? You can use funds from your health care FSA to pay for eligible medical costs for both your spouse and tax dependents, regardless of the medical insurance in which they are enrolled, because it's kind of like a different thing. It's not specifically tied to the insurance. It's kind of thinking that you're paying stuff that's going to be out of pocket kind of medical type of expenses. So to use funds for your dependents, they must be claimed on your tax return. So it is a tax related item. So clearly if you're saying that they're dependent, we're generally talking dependents for taxes would be someone that you would be expecting to see claimed on the tax return. And dependents cannot file their own return. If they file their own return, then you would think they might not be claimed on your return.


Hello everyone! In the previous video, we saw what Pictoblox is, explored its user interface and finally saw the working of some basic blocks by making a small animation. In this video, we are going to explore Pictoblox stage mode and see how we can control hardware in real time. We are also going to create a small script to make our sprite Toby jump when we press evive's tactile switch by connecting evive to the computer using a USB cable or over Bluetooth. Let's first understand what stage mode is. The stage mode is the mode of working in Pictoblox in which we can interact with the components like sensors, actuators and prototyping boards such as evive, arduino and esp32 in real time. Let's see how it works first hand. First open Pictoblox. Then connect evive to your computer via a USB cable. Click on the board button in the toolbar. A list of the boards that are compatible with Pictoblox will appear in the drop down. Boards like evive, arduino uno, mega, nano and esp32 can be programmed using Pictoblox. Select evive from the drop down. Next click on the connect button and select the appropriate serial port. You'll notice new pallets under the code tab. You can interact with evive using the blocks in these pallets. Since we are going to work in the stage mode, we must upload the firmware to the board. This will ensure the real time communication between the board and the computer. Uploading the firmware is a one time process. To do so, click on the upload firmware button. Observe that in doing so, the rx0-tx0 LED starts blinking. To check whether the firmware has successfully been uploaded or not, observe evive's screen. If evive's logo appears on the screen, it indicates success. Otherwise, retry the process. Now let's explore the new pallets. Blocks in the evive pallet allow us to control several of evive's features such as the tactile switches, slide switches, potentiometer, navigation key, touch inputs, real time clock and many others. Let's try one of these blocks. You can drop the set digital pin output block into the scripting area. This block, as the name suggests, can set the output of any digital pin as high or low in real time. By default, pin 13 is selected, which also has an LED connected to it. Click on the block to see what happens. You'll observe that pin 13 LED turns on. Similarly, to turn the LED off, select low from the drop down menu and click on the block again. The LED will turn off. Now let's move on to the actuator pallet. It lets you control actuators like the DC motors and servo motors. Let's try running a DC motor in real time using the run motor block. Select the motor to evive's motor channel 1 and attach a wheel to it. The first drop down in the block is for selecting the motor channel to which the motor is connected. In our case, it is 1. The second drop down is for changing the direction and the third is for changing the speed. As soon as you click on the block, the motor starts rotating in the selected direction at the set speed. Now to stop the motor, drag and drop the free motor block. Select free motor from the first drop down and the motor channel from the second drop down. Click on the block to stop the motor. Next is the sensor pallet. It lets you record the reading from the sensors connected to your board. You can interface various analog and digital sensors using the blocks in this pallet. The blocks in the display pallet lets you customize evive's display. Let's display a smiley on evive's screen using the display smiley block. Select the type of smiley you want to display from the first drop down and the size from the second drop down. Then enter the X and Y coordinates of the position at which you want to display the smiley. You can even set the background color and the color of the smiley using the last two drop downs.  Next is the dabble pallet. Blocks in this pallet lets you interface your board with dabble, a project interaction and bluetooth controller app. We'll cover it in detail in the later video. For now, let's get back to our pallets. You can add even more pallets to your collection from the extension section. Before moving ahead, let's clear the scripting area. Now let's write a script to make toby our coding partner in Pictoblocks jump using evive's tactile switch. First, let's change the backdrop. Click on the choose a backdrop button and choose the blue sky backdrop from the library. Now select toby from the sprite pallet to create his script. You'll notice that toby is standing in the center of the stage and we want him to be near the bottom edge. For doing so, change his Y coordinate to minus 110 in the sprite pallet. Now go to the motion pallet. Drag and drop the glide block. Set the gliding time as 0.5 second and X and Y as 0. Now click on the block. You'll observe that toby glides in the upward direction. Now to bring him back to his initial position, we need another glide block. So duplicate the block by right clicking on it and drop it below the previous block. Change Y to minus 110. Toby's initial Y coordinate. Now click on the two blocks. You'll observe that toby can now jump. But how do we make toby jump using evive's tactile switch? By using the tactile switch block from the evive's pallet. And to check whether the tactile switch has been pressed or not, we are going to use an if block from the control pallet. Drop it around the glide blocks. Then drag and drop the tactile switch block inside the hexagonal space of the if arm. Now we need to continuously check whether the tactile switch is pressed or not. For that drag and drop the forever block around the if arm. Finally to trigger the script drag and drop the when flag clicked block above the entire script. Maximize the stage and click on the flag to run the script. Press tactile switch 1 on evive and watch toby jump. Observe that as soon as you click on the green flag, the rx0-tx0 LED starts blinking which shows that the communication is taking place properly. If it is not the case, stop the script, disconnect evive from the computer, then reconnect it and run the script again. As mentioned at the beginning of the video, you can interact with your hardware via bluetooth as well. This means you can now control toby or any other sprite via lsd. Right rid of the usb cable, open the magic lid of evive and connect the bluetooth module by placing it in the headers provided. Now if you remember to connect the board, we first clicked on the connect button and then selected the serial port to which our board was connected. Similarly for establishing a connection via bluetooth, click on the connect button and instead of selecting serial ports, select bluetooth ports. A list of nearby devices will appear, select your bluetooth module from the list. You can recognize it either from its name or from the address written at its back. With this evive is now interfaced with pictoblocks via bluetooth. Now maximize the stage, click on the green flag and make toby jump wirelessly. Not only can you interact with sprites but also control robots in real time. You must have noticed that while you were running the script, the menu wasn't visible on the screen. To access the menu, center press the navigation key. If you want to come back to the stage mode, select exit firmware from the menu. Now in all the above cases, a computer was necessary to control a hardware. But what if we want to upload a script to a board so that it can work independently? That is what we are going to cover in the next video. Till then, share this video with your friends and don't forget to give it a thumbs up. Also, subscribe to STEMpedia and follow us on Facebook, Instagram and Twitter for more such educational content. Bye Bye