This clarification also makes it possible to take account of any possible measurement bias in the price index, as well as inflation differentials within the euro area;  BIS Review 113/2007  3  -  the quantitative definition of monetary stability brings the Eurosystem’s strategic framework close to that of central banks that rely on inflation targeting, especially if a broad definition of the latter is accepted, such as that expressed by the term “flexible inflation targeting”. The big difference is in the use made of forecasts derived from econometric models, which play a predominant role in “pure” inflation targeting strategies, whereas they are only one component in the decision-making process of the Governing Council of the Eurosystem;  -  especially in the early days, we were confronted with substantial criticism regarding our definition of price stability, considered by many observers as too ambitious.
I wish to stress that this commitment was reaffirmed in Hamburg a few days ago by the whole G20, including the United States – and this is important as we need to preserve, in the words of the G20 Leaders’ Declaration, “an open and resilient financial system, grounded in agreed international standards”i . Regarding Basel III, I sincerely hope that we can reach a balanced agreement among Basel Committee members by next autumn. The vast majority of the Basel III framework has indeed already been agreed and is now largely implemented, notably in Europe since 2014 with the CRD IV package. The main outstanding point of discussion is, as you know, the so-called “output floor” which would apply to banks using internal models. The objective of Basel III is to lay the foundations for a strong, balanced and risk-sensitive international regulation, while reducing the undue variability of risk-weighted assets (RWAs). So we need a prudent but a  1  reasonable level of the output floor, combined with strengthened supervision of banks’ internal models – and Europeans made sensible proposals to achieve this. But should the output floor be set at too high a level, the consequences in terms of the reduction of risk sensitivity and the increase in capital requirements would be unacceptable: for example, a 75% output floor would affect half of international banks. It would de facto result in creating a “Basel IV” framework based on the standardised approach.