Jean-Claude Trichet: Macro-prudential oversight and the future European Systemic Risk Board Keynote address by Mr Jean-Claude Trichet, President of the European Central Bank, at the European Banking Congress, Frankfurt am Main, 19 November 2010. *  *  *  Ladies and Gentlemen, It is a pleasure for me to participate in the European Banking Congress. We are meeting at a very important time for Europe’s financial system, of which so many senior representatives are assembled here. This is also a very important time for the European economy and for the governance of the euro area. Looking at the current situation, we have to be very clear as to what the issues are and where the solutions lie. As its name suggests, Economic and Monetary Union has two attributes: one is “Economic” and one is “Monetary.” The “Monetary” attribute refers to the ECB, its mandate and its independence. I will come to this in a moment. The “Economic” attribute comprises the fiscal regime enshrined in the Stability and Growth Pact; the national frameworks of economic policy; and the system of mutual surveillance. The developments we are currently witnessing in Europe’s economy have to do with its “Economic” functions. They have essentially three origins: unsound fiscal policies in a number of member states; inappropriate macroeconomic policies in a number of member states; and overall an inadequate system of surveillance by all member states. This is the triangle that provides the perimeter of the current situation.
It will bring together the governors of the national central banks, the new European Supervisory Agencies (ESAs), the European Commission and the national supervisory authorities of all 27 member states. The establishment of the ESRB was first recommended in February 2009 in the report of a high-level group chaired by Jacques de Larosière. The new institution is backed by a remarkably strong consensus between the European Commission, the European Council and the European Parliament. In the Parliament, the legislation underpinning the establishment of the ESRB was approved with an overwhelmingly large majority of 80%. This gives a strong backing to the ESRB and its mission. The ECB will contribute to establishing the ESRB as a credible and effective body. Concretely, the ECB will host the Secretariat of the ESRB, thereby making it operational and providing analytical, statistical, logistical and administrative support. But whilst the ESRB Secretariat will be located at the ECB, the ESRB will be a separate body, distinct from the ECB. The establishment of the ESRB will not affect the mandate and the functioning of the ECB’s statutory role in monetary policy. The establishment of the ESRB will be a landmark event in how Europe deals preventively with systemic risk. It forms part of wider developments across the globe, including in the US with the newly created Financial Stability Oversight Council (FSOC). Very much like the ESRB, this council is a collaborative body bringing together the relevant US authorities with the aim of identifying systemic risk and responding to threats.