2  Larger sphere of influence of monetary policy on financial markets Unconventional measures also aim to ensure appropriate monetary conditions in the respective countries and currency areas. So there has been no change to the fundamental policy principles of ensuring price stability. What has changed, however, is the way in which central banks’ monetary policy stimuli are transmitted to the banking system and the financial markets. Using unconventional measures, central banks directly influence price-setting on those markets in which they are active. This applies especially to balance sheet measures. However, I would first like to look at unconventional interest rate policy. Unconventional interest rate policy as a means to reinforce interest rate stimulus  Forward guidance and negative interest rates pick up where conventional interest rate policy stops. We can see this from chart 2. The objective of such measures is to intensify the desired interest rate stimulus. Forward guidance is aimed at influencing medium and long-term interest rates by providing information on the expected development of short-term interest rates. Central banks have already made use of this measure in the past. 3 However, since the financial crisis, some central banks have taken to explicitly announcing the period for which low interest rates would remain unchanged, or which economic conditions should be met before market participants could expect interest rates to be raised. 4  1 2 3 4  This can include the Bank of Japan’s intention to fix the yield on ten-year government bonds at around zero in future.

While these links are not new, they now warrant closer attention for two reasons. First, the financial system has come to rely more on central counterparties. The introduction of mandatory central clearing requirements in response to the crisis has made financial markets safer and more transparent. This is in large part thanks to the European Parliament’s push for stronger financial regulation, such as the European Market Infrastructure Regulation (EMIR). While this strengthening is of course welcome, it also means that CCPs have become more systemic. Second, the United Kingdom’s decision to leave the EU means that, under the current legislative regime, several CCPs clearing significant volumes of euro-denominated business will be operating outside the framework of EU regulation and the safeguards this provides. In this context, the Commission’s EMIR II proposal, currently being discussed by this committee, is a welcome and necessary initiative. The existing regime was never intended to cope with large-scale euro-denominated clearing activities being carried out in a country outside the EU. The EMIR II proposal would enable EU authorities to directly supervise systemically important third-country CCPs on the basis of EU regulatory requirements using EU supervisory instruments. The proposal provides for an enhanced role for the central bank of issue in this context, reflecting the strong links between clearing and monetary policy. The indispensable corollary to the EMIR II proposal is the recommendation to amend Article 22 of our Statute, which was unanimously adopted by the ECB’s Governing Council last June.