European Central Bank: Press briefing – transcript Transcript by Mr Jean-Claude Trichet, President of the European Central Bank, following the meeting of the Governing Council, Frankfurt am Main, 2 August 2007. *  *  *  Let me just say a few words and then I will be ready to respond to questions, as usual. Recent economic developments and survey indicators confirm that sustained economic growth continued in the euro area through the second quarter. Rising oil prices, emerging capacity constraints and the potential for stronger wage and cost dynamics, among other factors, imply upside risks to price stability over the medium term. The existence of upside risks to price stability at medium to longer-term horizons is confirmed by the strength of the underlying rate of monetary expansion: strong vigilance is therefore of the essence to ensure that risks to price stability over the medium term do not materialise. Both, our previous economic and monetary analysis as expressed in particular in the last press conference have been fully confirmed by the ongoing information we have received since the last meeting of the Governing Council. Let me also stress that we never precommit, we decide at the moment of the meeting of the Governing Council on the basis of the information that we have, facts and figures, and according to the judgement that we make at that moment. I re-emphasise that we never pre-commit.
The largest financial institutions are big players on these markets, which operate according to private and decentralised mechanisms. Total notional liabilities on OTC derivative markets rose from USD 72,000 billion in June 1998 to USD 88,000 billion at end 1999. The average daily turnover on these markets increased by 50% between April 1995 and April 1998. •  Users’ desire to improve efficiency has also driven the evolution in market structures. Planned links between stock markets, particularly in Europe, and the consolidation of delivery-vs-payment systems testify to these concerns. Domestic trading floors with regular working hours are gradually giving way to electronic international markets open around the clock. And the official trading systems of the various financial centres are in turn being challenged by private trading systems such as Electronic Communication Networks. Third: new demands for transparency and profitability in the financial industry Spurred on by this competitive pressure, the principles of corporate governance and value-adding have taken root, in particular under the impetus of fund managers. These principles force players to meet new requirements in terms of transparency and profitability. Such requirements encourage participants in the global market to adopt new investment behaviour, in particular with the spread of index-linked management or massive recourse to leveraging. These objectives also result in the use of fairly homogeneous risk management techniques, such as the definition and use of limits, risk management with value-at-risk models and the development of stress testing.