To put it differently, the sprint is over giving way to a more long distance run. And, for interest rates as with ballistics, “longer” is becoming more significant than “higher.” B. Separation of price stability and financial stability The two recent crises that engulfed SVB and Credit Suisse have shaken investor confidence and sparked increased volatility on financial markets – including speculative behaviour. However, we at the ECB are confident in the resilience of the European banking system, as signalled by the unchanged course of our monetary policy at our March meeting. All European banks are subject to stringent Basel 3 requirements and the overwhelming majority of them are also subject to single supervision within the Banking Union – which is a big difference vis-à-vis the US banking sector. French and European banks benefit from a well-diversified and profitable business base, be it on the deposits or on the credit side, unlike SVB. The increase in interest rates has even started to boost their net interest income, which grew by 12.7 % in 2022 at the twenty main Euro area banks – this should  Page 5 sur 7 also raise questions over the alleged trade off between price stability and financial stability. This trade off is a fashionable idea at the moment, but I find it overdone. The goals are not necessarily incompatible, and we have separate instruments to achieve them. For the great majority of European banks, higher interest rates are beneficial.

They should be pursued as a matter of priority, while ensuring a globally consistent approach. Third, it is essential to address risks from non-bank leverage from various perspectives. A key priority should be to develop a globally consistent approach to addressing risk from both financial and synthetic leverage in the non-bank financial sector. Further improving data quality and coverage and information sharing are central to assessing leverage-related risks across non-bank financial sector entities and activities. This work should be complemented by identifying gaps in policy frameworks globally, especially where financial entities are not subject to adequate leverage rules. Fourth, there is a need to enhance margining practices and liquidity preparedness to meet margin calls. Since the March 2020 market turmoil, the non-bank financial sector has been repeatedly confronted with periods of high market volatility and surging liquidity needs from margin calls. Increasing the transparency and predictability of initial margin models and assessing their responsiveness to market stress can help reduce the procyclical demand for liquidity. In addition, ensuring robust liquidity risk management and contingency planning frameworks would mitigate risks associated with inadequate liquidity preparedness. More generally, we must recognise the cross-border dimension of activities and regulatory developments in the non-bank financial sector and the importance of global coordination. For example, the new guidance recently proposed by the US Financial Stability Oversight Council facilitating the designation of non-banks as systemically important demonstrates that these issues are being considered outside of Europe.