To develop a more complete view of the impact of financial market developments on bank balance sheets, financing conditions and money and credit growth, further analysis will be required. The ECB’s Governing Council stands ready to counter upside risks to price stability, in line with its mandate. Against this background, on 6 December 2007 we decided to leave the key ECB interest rates unchanged. The Governing Council will monitor very closely all developments. In particular, as I said on behalf of the Governing Council after our last meeting, for the recent increase in inflation to remain temporary, it is essential that the price and wage-setting behaviour remains unaffected by current inflation rates, so as to avoid the emergence of second-round effects. By acting in a firm and timely manner on the basis of its assessment, the Governing Council will ensure that such second-round effects and risks to price stability over the medium term do not materialise. To firmly anchor inflation expectations in line with price stability is even more important at times of financial market volatility and increased uncertainty. In this respect, the Governing Council has decided to continue to pay great attention to financial market developments. Liquidity operations Ladies and gentlemen, once the Governing Council has defined the monetary policy stance necessary for maintaining price stability in the medium term, in line with its mandate as defined by the Treaty, the ECB has the responsibility to also ensure the smooth functioning of the segment of the money market that we influence.
This is supportive of the conclusion that the suite of postcrisis official sector actions in the U.S. has made the U.S. financial system more resilient, while not eroding global competitiveness. Provision of Financial Services I will now turn to the provision of financial services by looking at indicators of different types of banking activities such as lending or underwriting activities.10 A more rigorous analysis would identify supply and demand factors in an attempt to understand not just what has changed, but why, and could allow an assessment of whether financial services are efficiently provided. Nonetheless, this perspective provides a benchmark from the pre-crisis period to support some initial conclusions. In terms of traditional lending, (Figure 7) shows that the ratio of aggregate bank loans to GDP—a rough measure of credit intermediated through the banking sector—has recovered from the postcrisis low and is consistent with historical levels. In addition, aggregate net lending revenues, proxied by net interest income and scaled by GDP, are near historic norms despite compression of net interest margins in the low rate environment. Survey evidence of credit availability also shows ongoing provision of credit.