Yves Mersch: Legal aspects of the European Central Bank’s response to the coronavirus (COVID-19) pandemic – an exclusive but narrow competence Keynote speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank and Vice-Chair of the Supervisory Board of the European Central Bank, at the ESCB Legal Conference, Frankfurt am Main, 2 November 2020. * * *  Exploring the legal framework governing the ECB’s actions – scope and general legal principles When exploring the scope of our actions we are cognisant that the ECB has exclusive but narrow competence to define the European Union monetary policy for the purpose of maintaining price stability. Moreover, the European Court of Justice has consistently held that the ECB enjoys broad discretion in defining monetary policy within its mandate to pursue the objective of price stability. Discretion without limits increases the risk of arbitrariness. Therefore the Court has insisted on being able to control this discretion on the basis of the criteria that some refer to as the self-imposed constraints. Furthermore, we are bound to respect certain established legal principles. Our measures must be proportionate to the ECB’s legitimate objectives. They must not undermine the spirit of the “no bailout clause” and must also comply with the prohibition of monetary financing, which is its monetary policy counterpart. Last of all, the principle of an open market economy in which resources are allocated efficiently must also be respected. These are the constitutional red lines for our actions.

First, the Eurosystem is developing a securities holdings statistics database. “Securities holdings represent a field where exposures are often concentrated, and a lack of sufficiently comprehensive, consistent and granular information has been identified” (Draghi 2012). Second, more detailed balance sheets information of all financial intermediaries have been developed. Third, a matrix of integrated sector accounts has been devised and is published on a quarterly basis. Fourth, quarterly information on cross-border holdings of financial assets and liabilities by euro area residents is compiled, allowing for monitoring of cross-border exposures. The second lesson of the crisis was that data production should be multipurpose. The granularity of the data means in fact better use of the micro-foundations of the macro statistics. Albeit the need for more granular data primarily came as a result of the requirements of the macro-prudential oversight, their weight for the monetary policy is very large as well. As monetary policy-makers we want to act proactively and this requires identification of the risks in advance, which very often requires “going beyond the aggregates”. Hence, both for monetary policy purposes and financial stability purposes, variety of granular data and indicators are needed, which allows for data “outliers” and “tail risks” to be noticed. It is more natural than to seek for harmonized data collection systems, serving both mandates of central banks, monetary policy and financial stability. Of course this requires extraordinary coordination among the compilers of the data. It is easier when the central bank serves as a supervisor at the same time.