SPEECH  Welcome remarks Remarks by Luis de Guindos, Vice-President of the ECB, at the fourth annual ECB macroprudential policy and research conference Frankfurt am Main, 16 December 2019 I am delighted to welcome you all to the fourth annual ECB macroprudential policy and research conference. This conference is held annually to ensure that we meet regularly and advance our understanding of macroprudential policy. This year’s focus is on monetary policy and financial stability as it represents the conclusion of the ECB’s Research Task Force dedicated to this topic. In my remarks today I will cover three aspects of macroprudential policy and research. First, I will reflect on the economic and financial conditions that may represent challenges for macroprudential policy. Second, I will focus on selected achievements at the ECB in advancing the research frontier. Finally, I will address the need of rebalancing capital requirements towards releasable buffers to allow macroprudential authorities to act more effectively in a countercyclical manner especially in adverse economic conditions. Macroprudential policy in a changing environment The current environment is characterised by a weakening of the macroeconomic outlook and increasing uncertainty, even though the latest indicators point to a stabilisation of economic activity. The associated low-for-longer interest rate environment is likely to put pressure on bank profitability. Weak profitability and squeezed margins pose a risk to financial stability as they may hamper banks’ intermediation and capital generation capacity. It is thus important to assess the interaction of monetary and macroprudential policies while respecting their individual mandates.
Other national authorities have had – or are having – similar discussions, such as in the United Kingdom and in the United States. [11] To me, such a reallocation appears to make sense in the current environment of heightened uncertainty and risks tilted to the downside. With a reallocation of buffers, cyclical systemic risk factors – common to the entire banking sector – would be covered appropriately by the CCyB. In turn, remaining idiosyncratic bank-specific risks will continue to be covered by microprudential requirements. The reallocation would be capital-neutral because the resulting increase in the CCyB would be offset by a corresponding decrease in other capital requirements, for example in Pillar 2, as done by the Bank of England. The capital-neutral creation of releasable buffers does not require a regulatory change. Indeed, the CCyB is already enshrined in EU law and transposed in the national context. It is used to address cyclical systemic risks that are common to the entire banking sector. To ensure that all relevant risks in the banking sector continue to be appropriately covered calls for continued close cooperation among all relevant authorities. This includes close coordination both among micro- and macroprudential authorities as well as between the ECB and national macroprudential authorities. National authorities will continue to remain first in line to deploy the CCyB to address changing systemic risks in their jurisdiction. Concluding remarks Let me conclude. The current macro-financial environment has become more challenging. The lower-forlonger interest rate environment creates strains on bank profitability with implications for financial stability.