This is certainly an area where I think dialogue amongst the industry would be beneficial to share information on the various approaches taken to modelling and setting impact tolerances. This will help individual firms understand where they are outliers and to consider if that is appropriate and justifiable. Getting this right over time will be key in supporting robust scenario analysis and ultimately, firms’ resilience. Findings on mapping and testing Our policy also set the expectation that, by the end of March this year, firms would have done enough mapping and testing to identify IBS and set impact tolerances, but we did not expect mapping and testing frameworks to be fully developed. From our conversations on this topic so far, it appears that firms have typically leveraged existing frameworks and tools at this stage. 4 It is also clear that the maturity of firms’ thinking in these areas varies significantly. This may be understandable, as firms still have time before the final deadline in March 2025, but it indicates that significant further work is required in the next three years for firms to embed fully coherent mapping and testing frameworks. Summary of initial supervisory review So, to summarise, our view based on our initial supervisory work is that meaningful progress was made by firms in developing their Op Res capabilities ahead of the first deadline in March 2022.
Yves Mersch: Policy needs, knowns and unknowns in the aftermath of the crisis Keynote speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at UBS, Zurich, 4 February 2016. *  *  *  I would like to thank Valerie Jarvis for her assistance in preparing this speech. Ladies and Gentlemen, I would like to thank Valerie Jarvis for her assistance in preparing this speech. Coming out of a crisis, one of the biggest challenges that policymakers face is uncertainty about the state of the economy. We can respond to this, of course, by looking at stylised indicators, such as inflation or employment. But for a forward-looking monetary policy, that’s not sufficient. We need to know the strength of the inflation pressures building up over the medium-term – that is, whether the economy is over-heating or under-cooking relative to its underlying potential. It is for that reason that central banks have traditionally used the concept of potential output – the level of output consistent with price stability – to gauge inflationary pressures. 1 If actual output is above potential output, there is a positive “output gap” and we can expect upward pressures on inflation. And if actual output is below potential, the opposite will be the case and disinflation will follow. In general terms, I see nothing wrong with this way of thinking. The economy is vastly complex and we need simplifying frameworks for assessing “how it’s doing” overall.