The present financial epidemic has broadly mirrored those dynamics. The failure of a core set of large, interconnected institutions – Fannie and Freddie, Bear Stearns, Lehman Brothers, AIG – contributed disproportionately to the spread of financial panic. Epidemiology provides a second key lesson for financial policymakers – the importance of targeted vaccination of these “super-spreaders” of financial contagion. Historically, financial regulation has tended not to heed that message. As Chart 4 demonstrates, larger polygamous financial institutions have if anything run with lower capital buffers than their smaller monogamous partners. There are two potential explanations for this seemingly perverse result. First, Basel II conferred diversification benefits on larger firms. Second, even ahead of crisis there was a market expectation that larger firms were more likely to receive government support. As Chart 5 illustrates, those expectations have subsequently been validated by events, with the largest packages of official sector capital support having gone to the biggest global banks. Hastily convened marriages between institutions during the crisis have increased the size and degree of concentration within the banking industry. So regulation may have contributed to perverse risk-taking incentives among large, interconnected firms. And subsequent interventions may have worsened those incentives. In response, the authorities in a number of countries have recently announced their intention to tackle this incentive problem, by better aligning regulatory taxes with firms’ systemic importance. No country has as yet turned that statement of intent into an operational framework for systemic regulation.

A characteristic of the current situation in the euro area is the trend towards disinflation. The ECB expects to end this year, 2015, with a positive – but very close to zero – inflation rate. The risk of deanchoring medium-term inflation expectations does not seem imminent, but even so, the tendency in recent months is once again somewhat worrying. The phenomenon of inflation-free growth we are experiencing is one of the most noteworthy features of global economic developments in recent years, and a subject of debate and analysis by international economic organisations, academics and experts. The course of energy prices and globalisation are undoubtedly explanatory factors, but the phenomenon is admittedly one that poses many questions and, consequently, difficulties for economic policy. ECB measures For several years ECB monetary policy has striven to resolutely support economic recovery through standard and non-standard measures. After exhausting the standard measures, in September 2014 the ECB announced its quantitative easing programme with two new components: the asset-backed securities (ABS) purchase programme and the covered bonds purchase programme. Subsequently, in January this year an agreement was reached to extend the programme to include public securities. As at 30 September 2015, the assets acquired by the Eurosystem under the expanded purchase programme amounted to slightly more than € billion, a substantial amount of which (almost 72%) comprised government bonds. The programme has helped enhance monetary policy transmission, by reducing the fragmentation of European financial markets, and provided for lower borrowing costs for households and firms.