Answer: I will wait for all our accounts to be finalised. Question: In October you considerably expanded the collateral framework for credit operations. Since then you have accepted more risky securities as collateral. How high is the ECB’s exposure as a result? Answer: Like all other central banks, we have been more forthcoming as regards our collateral framework in order to provide the banking sector with appropriate liquidity. Our balance sheet has grown by approximately 55% over the last 12 months. At the same time, we have to permanently ensure that our risk management is improved to take into account the increased volume of risks. Question: The financial sector has been largely safeguarded through guarantees and equity capital aid. Now the car industry is asking for state support. Is this not understandable? Answer: The decision on this falls first of all under the responsibility of the national governments and parliaments. As a central bank, we have emphasised the fact that the financial sector is of systemic importance because it affects all other sectors, all enterprises and their employees. Question: Knowing what we do now, was the interest rate increase in July this year a mistake? And why is it generally so difficult for central bankers to admit to mistakes? Answer: The modest interest rate increase in July was important taking into account the inflationary threats that were visible at the time. Question: What were those threats? Answer: Long-term inflation expectations threatened to become unanchored.
But even if all organisations that were in trouble had been rescued, it would have remained necessary for central banks and governments on both sides of the Atlantic to take extremely bold measures in order to be prepared for systemic liquidity and insolvency risks. Question: How do you explain the fact that, despite the ongoing banking crisis, the ECB’s statistics do not yet indicate the existence of a credit crunch in the euro area? Answer: What is true is that we see a certain weakening in the dynamics of loans to enterprises. But the rate of growth of outstanding loans to non-financial corporations has remained robust in double-digit figures. However, since bank lending standards have been tightening significantly for some time and the financial crisis entered a new phase only in mid-September, we must observe all developments very closely and remain attentive to new facts and figures. Question: The major investor Warren Buffett once described credit derivatives as “financial weapons of mass destruction”. Do you share this view? Answer: I wouldn’t necessarily use that formulation myself. But the level of complexity and lack of transparency reached in the production, marketing and selling of these financial market instruments indeed proved to be destructive and contributed substantially to the fragility of financial markets. 2  BIS Review 1/2009  Question: The reputation of the ECB has been strengthened by the crisis. Has it also profited financially from the brisk demand for the greater amount of liquidity made available?