Last week the High Council for Financial Stability alerted on potential risks associated with commercial real estate, especially: “the sharp rise in demand by investors on certain market segments and a high level of prices, in particular office prices in the Paris area”. The HCSF’s assessment will be released for public consultation in the coming weeks. We are ready, when needed, to take action with macroprudential measures, to prevent and mitigate any systemic risks that might arise. In sum, monetary policy is doing a great deal to counter weak inflation and support economic activity – it is our duty and we will continue to do so with steadfast resolve: we are consistent in our objective, ready to act with the right instruments, and alert to any possible risks. However, I would like to stress again that “monetary policy cannot be the only game in town”. Other economic policies also have a crucial role to play. This is precisely what the members of the G20 reiterated in Shanghai on 27 February: “Monetary policies will continue to support economic activity and ensure price stability, consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth”. Where there is sufficient margin to do so, fiscal policy must support demand – this is not currently the case in France, but it is in other countries in Europe. Moreover, structural reforms remain absolutely vital in France, to encourage creations of jobs and of businesses and thus bring the economy back to full potential.

Steps are currently being taken in this direction via public and private sector solutions, but these remain essentially ad hoc and not part of a well-established framework for maintaining and restoring, when needed, levels of capital commensurate to the needs of the European banking sector. Second: a European framework for micro-prudential supervision A more comprehensive European-wide understanding of systemic risks needs to be complemented by an effective micro-prudential supervisory framework to monitor and prevent these risks. This implies a more consistent set of regulatory and supervisory rules across Member States, together with stronger rules and practices for co-operation between supervisory authorities on cross-border groups, both in normal and crisis situations. In this context, the European Supervisory Authorities have been allocated a significant set of competences related to rule-making, enforcement of rules and co-ordination of supervision. All together, through these tools, the ESAs are expected to develop a single “EU rulebook” which is enforced consistently throughout the single financial market. This should address a major weakness in the current framework, namely the divergences across countries in key regulatory elements – for example the different components of regulatory capital used across Member States. Furthermore, the ESAs have the power to take legally binding decisions addressed to national supervisors or, in case of non-compliance, to specific financial institutions if warranted by financial stability considerations. These powers can be triggered by a breach of EU law by supervisors; disagreement between national supervisory authorities in cross-border situations; and the declaration of an emergency situation by the Council.