This is not a side issue for central bankers, as we are now in charge of financial stability as well as price stability. Moreover, a robust and profitable financial sector is one of the prerequisites for the proper transmission of our monetary policy. 1. Where do we stand in the euro area with respect to monetary policy? I am fully aware of the heated debate here in Germany surrounding our monetary policy. A debate that is fully legitimate, but let us try to keep it rational, and avoid getting emotional. “Mehr Licht!” (more light!) if you allow me to quote Goethe’s last words. This is exactly what I would like to do today: to shed light on our reasons and our progress. As you know, the ECB was shaped according to the model of the Bundesbank, and I do believe that the Eurosystem’s collective monetary policy is very much aligned with the German values that I fully share and admire: independence, respect of the Treaties, price stability and a longterm approach. As price stability is the mission entrusted to us by the European Treaties, we have a duty to make it our primary focus. Price stability means an inflation rate of close to, but below, 2% over the medium-term. This has been our definition since 2003, and it is a definition that most central banks in developed countries share – what Jean-Claude Trichet rightly terms as “a great convergence".
As regulators, we obviously have a part to play in helping the finance industry adapt. We should strive to reduce uncertainties as much as possible. One source of uncertainty today is the regulatory framework. Nearly ten years after the crisis, our priority must be to stabilise the rules. The main elements of the Basel III package have already been approved in 2010–11 and have largely entered into force. But there are still ongoing discussions regarding the measurement of risk on bank balance sheets. The objective, as you know, is to reduce the unwarranted variability of results between banks and across jurisdictions. And as the German G20 reiterated last week, the completion of reforms must not result in a “significant increase in overall capital requirements”. We have not yet reached an agreement. Thanks to our mobilisation and that of our European partners, we have avoided a bad agreement. For the coming months then, our objective is to reach a good one. Another source of uncertainty is Brexit. With article 50 about to be triggered, we obviously cannot prejudge the outcome of the future negotiations. But it is essential to bear one principle in mind: in the single market, you cannot separate access and rules. In financial services in particular, you can hardly expect to have a European passport if you don’t accept the single market’s rules. Let us be clear: we are saddened by Brexit, and we are not the ones who have decided to have a so-called “clean Brexit".