Australia, which is slightly bigger than the Netherlands, also has 4 big banks, but they are mainly domestic, smaller than the Dutch although bigger than the Singapore banks. The Australian government maintains a “Four Pillars” policy, under which it will not allow any of the 4 banks to merge or take over any of the others, in order to maintain sufficient competition in the domestic market. But there is debate in Australia over whether this “Four Pillars” policy is sustainable, or whether it will cause Australian banks to lose out in the long run, by preventing them from becoming large enough to be truly viable. Singapore’s economy is ¼ the size of Australia’s. Singapore cannot afford a “Four Pillars” policy. If we tried that, our banks would be like bonsai plants, root-bound by the small pots in which they grow. Our biggest bank – DBS, even after the merger with POSBank, is ranked only 115th in the world by asset size. In banking size is not everything, but size is important. If the local banks fail to achieve enough scale, they will not be able to invest in cutting-edge technology and management systems, or to attract the talent necessary to compete with the best players. Their service standards and product range will not be able to keep up with their foreign competitors. They will find it difficult to diversify their earnings by competing in fee-based businesses, like asset management and cash management.
I think there is very broad agreement in the Governing Council of the ECB that a high degree of monetary accommodation will remain needed and that's irrespective of the trade war or anything we've seen recently. That's because the economy and in particular the inflation in the eurozone is not yet where we want to see it. Monetary accommodation will remain needed but we'll see a change in the mix of our instruments. In particular as we come closer to the point where our medium-term inflation objective is met, I would expect the role of rate guidance to be strengthened. We've been clear on that. In terms of the models which you must be running that a trade war could affect as well and could affect Europe as well, those models would've been run at the ECB, I'm sure. What are they saying? 1/3  BIS central bankers' speeches  They clearly say that a trade war would have a damaging impact on the global economy, more so in the US and more so in economies which are either very closely related to the US or are deeply integrated in global value chains. The impact on the eurozone would be less and it all depends on how this conversation on trade will evolve and we don't know yet. That's why I'm saying we should look through it. Does the ECB have the tools, though, to negate the effects of a trade war if indeed the worst ramifications do happen?