Today, I will first discuss the monetary policy measures that the ECB has taken to fulfil its mandate and what impact these have had on the real economy. I will then explain how steps to complete banking union and a capital markets union would not only support a strengthened EMU (along with fiscal and economic union, as well as democratic accountability) but also contribute to enhancing financial stability. As European developments need to be put into a wider perspective, I will also say a few words on ongoing discussions in international fora regarding global developments and international financial regulation. Monetary policy and its impact on the real economy 2015 was characterised by a modest economic recovery. However, inflation dynamics were weak and continued to deteriorate throughout the course of the year. Thus, after adopting our credit easing measures in the middle of 2014, we took further decisive action in 2015 to pursue our price stability mandate. Let me remind you that, in January last year, inflation in the euro area had moved into negative territory, the outlook on inflation had worsened significantly and market-based inflation expectations stood at historic lows. In this situation, we judged that our monetary policy measures had to be stepped up in view of our price stability mandate. Therefore, as of March 2015 we expanded our asset purchase programme (limited until then to covered bonds) to public sector securities.
In the past few months, a discussion has started about the need for a new risk reduction agenda. But, before discussing such further steps, it is worth recalling that we have already made significant progress – since the beginning of the crisis – in “de-risking” Europe’s financial system. We enhanced and implemented the single rulebook; defined a common resolution framework for banks to protect European taxpayers; established the Single Supervisory Mechanism and Single Resolution Mechanism, and conducted a Comprehensive Assessment of banks to deal with legacy issues before the start of Banking Union. The results are tangible. The Common Equity Tier 1 ratio has risen, on average, from around 9% to 13% since 2012 for significant institutions. Most European banks have managed to meet the fully-loaded capital requirements by now. While a lot has been achieved, there is no room for complacency: too many of our banks are still troubled by the ghosts of the past, legacy assets and NPLs. The ECB as supervisor is actively looking into this and has identified the issue as a priority. So, what is left to be done to mitigate the remaining risks and make the financial system more resilient? It is important to further improve and fine-tune what we have started. First, there is still room for improvement when it comes to establishing a truly level playing field, for example by creating a truly single rulebook.