The ECB and the entire European System of Central Banks stand ready to assume the macro-prudential supervision tasks envisaged in the report by the de Larosière Group and to provide the necessary analytical and logistical support to the Systemic Risk Council. For the new Council to function effectively, three key requirements will need to be fulfilled: First, in order to identify and assess the risks and vulnerabilities in the EU financial system as a whole, to issue risk warnings and to adopt related macro-prudential policy recommendations, the Systemic Risk Council will need to have an information base that draws on both macroand micro-prudential supervisory information. This will allow the use of all relevant information for assessing, among other things, the “interconnectedness” of financial institutions and markets and its implications for financial system stability. Close cooperation and well-functioning information-sharing mechanisms between the new Council, microprudential supervisors and the proposed European System of Financial Supervision will therefore be indispensible. Second, adequate institutional mechanisms need to be in place to ensure that the risk warnings and the related recommendations issued by the Systemic Risk Council are translated into effective action. The days when risk warnings were issued and very few listened – or wanted to listen – should be over! Third, for the Systemic Risk Council to be effective, legitimate and independent in its decision-making, a solid legal basis is  4  BIS Review 49/2009  essential.
BIS Review 49/2009  3  as well as to the commercial and residential property sectors. Moreover, financial markets – despite recent positive developments in equity markets worldwide – remain vulnerable to swings in investor confidence and risk aversion, which could adversely affect liquidity and asset prices in some markets. Against the background of these very difficult conditions, significant policy measures have been taken by central banks and governments in Europe to improve market liquidity and replenish capital buffers. Governments created schemes for guaranteeing new bank debt, injected capital and, more recently, provided asset relief. These measures were successful in preventing a meltdown of financial systems and they helped to bolster confidence. The Eurosystem provided important input into the design of these measures, in the form of recommendations aimed at ensuring that such measures would help to safeguard financial stability and restore the provision of credit to the private sector, while at the same time maintaining a level playing-field within the Single Market to the maximum extent possible, and also containing their impact on public finances. It is still early to accurately assess the impact of these government measures on the longerterm funding and the recapitalisation of banks as well as their effectiveness in fostering bank lending to the private sector. This is because the evidence is relatively limited, as the implementation of the measures has been gradual over the past few months.