We have always been in favour of a very close relationship between the central bank and the banking surveillance authorities. We said that long before any new problems, any new difficulties. We had a Governing Council position close to the start of the ECB, which we made public. We also strongly believe that better coordination for big cross-border institutions is absolutely necessary. Some avenues have already been suggested by Ecofin, the Council of Finance Ministers in the EU. The European Parliament has also carried out several works. The European Commission set up the De Larosiére group, a high level working group, to make recommendations. One of the European Parliament’s suggestions is that the ECB could play a particular role in this domain for the coordination of surveillance for cross-border institutions. In the US the Federal Reserve has a surveillance responsibility which concentrates very much on the big cross-border institutions. I see similar suggestions coming from the private sector and from the industry. As President of the ECB’s Governing Council I have no position of the Governing Council, but I am impressed by the mark of confidence in the ECB, demonstrated by the previous suggestions. In any case, the fragility, not only of global finance but of the international economy itself, is something that we should not accept as a normal feature of the globalized market economy. A new concept of strong resilience at a global level is of the essence.
In the case of Chile, the supervisory landmark is made up of three superintendencies (including banks). In this setting, coordination for systemic stability is achieved at two levels. One the one hand, the Central Bank is involved in several aspects of financial regulation directly by dictating regulation, or by participating in consultations with other agencies. On the other hand, the Central Bank participates in two coordination instances with the superintendents and finance ministry. The experience during the last years has shown that during periods of financial turmoil, mainly as result of external shocks, the Central Bank, the Finance Ministry, and the financial regulation agencies have indeed worked in close coordination, and, as the global financial crisis testifies, results have been positive. Moreover, in Chile, as banking supervision takes place outside the Central Bank it is key that it is not out of touch with the broader macro environment, so that financial system stance visà-vis the risks perceived in the macro-outlook is the natural first step in the supervisory process. Recently, these instances have been formalized with the creation of a Financial Stability Council, headed by the Finance Minister. This council will, amongst other things, identify systemic risks and mitigation policies, and discuss the systemic impact of regulation. Summing up, monetary and prudential policies are closely connected, first because macroeconomic and financial stability are closely interlinked, and second because instruments designed to achieve stability in each front have cross effects. This interconnection suggests the need for coordination of both types of policy.