François Villeroy de Galhau: Looking up to achieve a Financing Union Speech by Mr François Villeroy de Galhau, Governor of the Bank of France and Chair of the Board of Directors of the Bank for International Settlements, at the EUROFI High Level Seminar 2022, Paris, 23 February 2022. * * * Ladies and Gentlemen, It is a great pleasure for me to open this edition of Eurofi today in Paris, and I extend my warmest thanks to Didier Cahen and David Wright for their tireless efforts that allow us to gather in this beautiful Hôtel du Collectionneur. Today I will indeed be speaking about a collection – not of fine arts, but rather of national banking and financial systems. Unfortunately, such a collection is nothing to rejoice about, it is rather an Achilles heel. But let me start with a few words about Ukraine. We are obviously monitoring closely the geopolitical developments, and their possible economic and financial implications. Let me already stress that the direct exposure of French financial institutions to Russia remains limited, but the SSM called all European banks to enhanced vigilance on cyber risks. We will assess in our Governing Council in March the more indirect consequences on inflation and growth, and we will be facts driven: more than ever, optionality – about the right monetary stance – and flexibility – to guarantee the right monetary transmission – are the two names of the game for our policy.
Preserving the credibility of our commitment to price stability is vitally important, not least because of the flexibility it affords us to confront future shocks that have the potential to cause damage to the financial system and the economy. Second, it is important that the United States work to build more confidence that it will act on the fiscal front to achieve a better balance between our commitments and our resources, both with respect to the medium term and the longer term. Given the inherent uncertainty surrounding long-term growth forecasts, the formidable rise in costs associated with providing for an aging population with longer life expectancy, and a potentially protracted elevation in national security costs, it makes sense to build a stronger financial position into our fiscal future. The present fiscal trajectory entails an uncomfortable scale of borrowing and little insurance against possible adverse outcomes in an uncertain world. Building a stronger fiscal cushion can help reduce the risk of adverse outcomes - those that might come in the form of a decline in the willingness of foreigners to acquire claims on the United States on the present scale, as well as those that might take the form of a reduction in private investment and lower future productivity gains. Strengthening confidence in our fiscal management and fiscal sustainability is critical to reducing the risk in the size of our external imbalance. Third, the U.S. and the major economies have an important role to play in encouraging further evolution in the international monetary system.