Frank Elderson: The challenges facing the ECB and Europe
Opening statement by Mr Frank Elderson, Executive Director of Supervision of the Netherlands
Bank, to the Economic and Monetary Affairs Committee of the European Parliament (virtual), 9
November 2020.
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In his opening statement in European Parliament at the formal hearing for the position of member
of the Executive Board of the ECB, Frank Elderson spoke about the challenges facing the ECB
and Europe, notably Covid-19 and the climate crisis, and about gender diversity.
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Dear Madame Chair, honourable members of the European Parliament,
It is an honour for me to speak to you today. Unfortunately, the Covid-19 restrictions make it
impossible to come to the parliament physically. As soon as circumstances allow, it would be
my privilege to meet you in person.
This hearing takes place at a time of great challenge for Europe. Covid has caused deep human
suffering throughout our communities, and has taken a severe toll on our economies. The
climate crisis remains as daunting and urgent as ever.
These challenges present us, as policymakers, with a solemn responsibility. Both the European
Parliament and the European Central Bank have a key role to play in steering Europe through
the current crises, and in making it better and stronger for the future.
Being fully conscious of the importance of this moment, I feel especially humbled and honoured
to have been selected as a candidate for member of the Executive Board of the ECB.
I welcome this hearing as a key step in the appointment process. Central bankers are
independent and unelected. Yet their decisions have an enormous impact on the lives of
citizens. For their legitimacy, it is essential that central banks operate within their legal
mandates, listen to concerns of the public, and account for their decisions to the people and to
you, their representatives.
In my short remarks, I will outline my experience before discussing my views on the challenges
facing the ECB and Europe in the near and medium term. Finally, I will turn to gender diversity.
Qualifications
I have been a central banker for most of my career. I have been a member of the Governing
Board of the Dutch central bank for more than nine years. At European level, I am a member of
the ECB Supervisory Board and I served as one of the first members of the Single Resolution
Board. At international level, I am a member of the Basel Committee on Banking Supervision,
and I chair the Central Banks and Supervisors Network for Greening the Financial System, the
NGFS.
In these roles I have learned how bringing different people and voices together leads to better
decision making and more effective policies. As a lawyer, I myself have often brought a different
perspective to decision-making, highlighting the need for sound legal bases and the importance
of adhering to the principle of proportionality.
I have also learned that good leadership is to keep a keen eye on developments that at first do
not appear relevant to a central bank, but which on closer scrutiny may have a big impact on its
objectives.
I began my remarks with the challenges Europe faces. Let me now briefly set out my views on
how the ECB can help overcome them.
Covid-19
The foremost among these is Covid. The ECB has played a crucial role in cushioning the
economic blow from the Covid-19 crisis by easing financing conditions for firms, households
and governments.
The ECB has shown a steadfast commitment to its mandate to maintain price stability, as laid
down in the Treaty. Notably, it acknowledged that inflation that is too low for an extended period
of time can be as problematic as inflation that is too high.
Going forward, the ECB should continue to do whatever it can within its mandate as long as
necessary to mitigate the economic impact of the pandemic. As member of the Executive
Board of the ECB, I would adhere to its course of unfaltering commitment to its mandate, and
agility under changing circumstances.
I welcome that in these challenging times the ECB is conducting its strategy review. Ensuring
that the ECB continues to fulfil its mandate requires not only discussing its definition of price
stability. It also requires assessing whether the instruments for achieving price stability are still
appropriate.
However, monetary policy does not operate in isolation. The effectiveness of the ECB's policies
is greatly supported by policies in the supervisory and fiscal domains.
First, a robust financial sector is key to supporting the economy during the recovery. The SSM
has taken important supervisory and capital relief measures to allow banks to keep financing the
economy. What we need to do now, despite its challenges, is to complete the Banking Union,
including a European deposit insurance scheme. Also, large investments needed for the
recovery from the Covid- 19 crisis underline the importance of finally creating a genuine Capital
Markets Union.
Second, the current crisis calls for a continued strong role for fiscal policy. With its strong
element of solidarity, Next Generation EU is a game-changer. It will provide much-needed
support and promote new sources of growth especially for those suffering most from the
pandemic. In doing so, it will not only benefit each Member State but also the European Union
as a whole.
Digitalization and climate change
This leads me to two developments that are at the top of the EU's agenda, including yours.
Developments that will be of major relevance to Europe and the ECB for the coming years:
digitalization and climate change.
The pandemic is accelerating the digital transformation in a way that is likely to reshape our
economies and societies. Technological innovation in finance is a good thing. It will enable
cheaper, faster and more secure services, increase competition and financial inclusion, and
thereby enhance peoples' welfare. But it raises fundamental questions, including about digital
sovereignty, the role of Big Techs, and about the future development of a digital euro. Central
banks should stay on top of developments, think long-term, and broaden the dialogue, for
example with privacy regulators, infrastructure players and the wider public.
The Covid-19 crisis also provides an impetus to the transition toward a carbon-neutral
economy. The ECB has a responsibility to contribute - within its mandate - to addressing the
longer-term challenges our economies are facing, in particular climate change.
This requires action today. In this regard, I commend this Parliament on its work on the EU
Taxonomy. The taxonomy is an important step in the process of greening the financial sector. It
provides a reliable basis for follow-up policy actions, including greater clarity on what are the
most harmful activities.
When it comes to monetary policy, the ECB should explore how it could design - within its
mandate - its instruments to adequately manage climate related risks and to contribute to
unlocking investments that support the green transition. In its supervisory role the ECB must
make sure that banks adequately manage climate-related risks.
Diversity
And now I would like to say something on diversity, and gender diversity in particular. I know
many of you would have preferred to have a hearing with both a female and a male candidate. I
know of your concerns regarding gender diversity. I share them.
The European Union is founded on equal rights and on the very value of diversity, as expressed
in its motto: in varietate concordia. Diversity is our treasure, and it is time we unleash its full
potential.
Within the Dutch central bank I have actively promoted diversity, including gender diversity. And
we have shown that positive change is perfectly possible. The aim is and has to be gender
equality. As member of the Executive Board I would strongly advocate that the ECB, and all
National Central Banks and all National Competent Authorities, commit to that very aim, and
achieve it.
Beyond bringing our own house in order, we can and should require more from financial
institutions to make their boards and staff composition more diverse. Not just as a box ticking
exercise, but to achieve real change. The Capital Requirements Directive you have
colegislated gives us supervisors a sound legal basis to do just that. If confirmed as member of
the Executive Board, I will do my utmost to make this a greater priority.
The challenges are many. But we can meet them, working together in mutual trust and in good
cooperation. If confirmed, it is in this spirit that I would seek to contribute to the ECB's important
work and work with you, the European Parliament, for the benefit of the euro area and the
prosperity of its citizens.
I thank you for your attention and look forward to this hearing.