In the case of the ECB, this review is ambitious; it not only analyses how to address this situation, but also the design and optimal use of monetary policy instruments, inflation measurement, the interactions between monetary and macroprudential policy, communication by the institution, and the impact of climate change, digitalisation and globalisation. One of the key issues will be the definition of the price stability objective. The current objective, consisting of a rate below but close to 2%, needs reformulating. First, it is necessary to clarify the inflation level it is wished to attain – e.g. 2% – to make it easier for citizens to understand and to allow a sufficiently high buffer, above zero, that will afford more leeway to interest rate policy. Further, this objective must be more symmetrical in nature, making it clear that our response to slippage below the objective will be as forceful as with deviations above it. Our determination to achieve symmetrical results in inflation developments around this objective will also be patent. Another key aspect is what monetary policy instruments we should have. In the setting described, asset purchase programmes and liquidity-providing operations for banks should be part of the normal “toolbox”. Moreover, we should equip ourselves with sufficiently flexible instruments to head off fragmentation dynamics that may compromise the proper transmission of monetary policy euro area-wide. Finally, allow me to voice some thoughts on the main challenges in the banking sector regulatory and supervisory area.

Among these, we have witnessed the separation of the responsibilities for preserving the financial soundness of all financial institutions irrespective of their nature (banking, insurance, securities, etc.) and for overseeing the conduct of their relations with  9  customers, assigning such responsibilities to different authorities (to the Banco de España and to the CNMV, respectively). This is, in my view, an optimal institutional arrangement for managing potential clashes between both responsibilities and for enhancing the efficiency and effectiveness of the supervisory activity. As I said, it will be important to respond to the new risks that emerge, which include most notably climate change and digitalisation. In the case of climate change, we supervisors must ensure that banks correctly assess risks and incorporate them into their portfolio management. We must also fulfil a complementary role by developing databases and appropriate reporting requirements, and by including risks in financial stability analyses. Indeed, many supervisors are developing environmental stress tests. As to technological developments, there are prominent risks associated with cyber attacks or with dependence on external services providers. But there are also those arising from the growing competition with technological companies, which may become disruptive. The consequences for prudential authorities are significant. We must maintain proactive supervision, since the traditional regulatory framework may not be enough. And we will have to question the regulatory perimeter, so that the habitual mantra of “same activity, same risks, same rules” is genuinely operational. Finally, we must strengthen cooperation among authorities given the diversity of sectors affected.