This ability has been severely tested by the crisis. Some of the challenges faced by the ECB have been common to other central banks. The threat to the viability of the interest rate channel, and the consequent need to devise alternative (“non-standard”) measures exploiting other channels of transmission, is a prominent example. The crisis has taught us that the liquidity channel exploited by monetary policy in the euro area can be very powerful. It has allowed the ECB to maintain the flow of credit to the real economy and ensure price stability even in face of the soaring liquidity and funding risks experienced by banks during the crisis. Other challenges faced by the ECB have taken a specific form in the euro area and thus been somewhat different from those experienced by central banks elsewhere. The most obvious one is the sovereign debt crisis, with the associated fragmentation of credit markets across national borders and more recently the break-up fears. The destructive potential of these developments is enormous. This has led the ECB to recently announce its Outright Monetary Transactions in secondary markets for sovereign bonds as a means to safeguard the monetary policy transmission mechanism in all countries of the euro area and to counteract self-fulfilling prophecies. The design of OMTs has been inspired by the desire to affirm in a lasting manner “monetary dominance”, in compliance with the principles enshrined in the Maastricht Treaty.
Our macroprudential authority – the National Committee for Macroprudential Oversight, comprising representatives from the central bank, the Ministry of Public Finance, and the Financial Supervisory Authority – adopted last year a recommendation to the Government, seeking to improve financial discipline in the economy and the financial soundness of firms. I strongly believe that addressing these structural vulnerabilities in the corporate sector will significantly increase the number of bankable firms and enhance the financial inclusion of Small and Medium Enterprises. Last, but not least, the climate-related topics have become more and more prominent worldwide. The financial system should not ignore the effects of climate risks. Central banks and supervisory authorities have joined the scene. There is a significant interest at EU level in the role of sustainable finance, a High-Level Expert Group on Sustainable Finance being established by the Union. The Network for Greening the Financial 4  System, that brings together 34 members, out of which 8 are central banks and supervisory authorities, highlighted the role of climate risks as a source of financial vulnerabilities. Not only the increased frequency and severity of extreme weather can translate into economic and financial losses for the real economy and the financial system, but consequences can also arise from transitioning to a low-carbon economy. Governments’ climate policy, new technologies and consumer preferences will be the main drivers influencing the developments in carbon-intensive sectors.