to the programme here in russia, a eurosystem programme on basel ii is under way involving the central bank of egypt. a crisis response package covering banking supervision and financial crisis management is being conducted with south - eastern european countries. and technical assistance is being given to a number of would - be eu members. europe strengthens its institutional framework for financial stability generally, europe has responded to the challenges of the past few years in a structured and thoughtful way. the creation of the european systemic risk board ( esrb ) broadens the scope of cooperation and institutional awareness in respect of macroprudential oversight. the ecb is the supporting institution and provides, inter alia, analytical and statistical inputs to the esrb structures. the risk board enables european regulators and supervisors to bis central bankers ’ speeches complement the microprudential perspective with a systematic monitoring and assessment of potential dangers to the stability of the system as a whole. the discipline of macroprudential supervision combines the information and assessments obtained via microprudential supervision with macroeconomic and monetary insights. we expect macroprudential measures, such as countercyclical provisioning, to mitigate systemic risks. we also expect the findings of macroprudential oversight to feed into the microprudential work that alerts supervisors and the wider world to macroeconomic risks. besides setting up the esrb, on 1 january this year, three european supervisory authorities ( esas ) came into being : the european banking authority, the european insurance and occupational pensions authority and the european securities and markets authority. we expect that these new institutions will sustainably enhance microprudential supervision in europe. currently, the eu and euro area financial system continue to face several important risks. the main source of concern is the interplay between fiscal imbalances, downside risks to economic growth and bank funding vulnerabilities. although this interplay is limited to a small number of euro area countries, with a relatively small share of total eu and euro area gdp, potential contagion to other eu or euro area countries is not insignificant. in this respect, let me state how surprised i am to see how quickly some of the lessons of the crisis are being forgotten. one of the lessons is the need to assess risk in a systemic way, not only at the micro level. there can be no systemic assessment without taking contagion into account, across instruments, across markets and across countries. the sub - prime crisis or the collapse of lehman

klaas knot : introduction to the press conference on the financial stability report introductory remarks by mr klaas knot, president of the netherlands bank, at the press conference on the financial stability report, amsterdam, 9 october 2023. * * * good morning everyone and a warm welcome to this press conference on the financial stability report. i would like to start with a brief outline of the key messages from the fsr and i will then be happy to answer your questions. economic outlook first, let me reflect on the economic outlook. since the high inflation peak last autumn, inflation has started to decline, but is expected to remain above 2 % for some time to come. this is why central banks have been tightening monetary policy further over the past year. with 10 rate hikes in 14 months, the ecb has lifted the policy rate from - 0. 5 % to 4. 0 %, which is a fast pace viewed from a historical perspective. rising interest rates have made it more expensive for households and businesses in the netherlands to borrow money. these tighter financial conditions are becoming increasingly evident in the economy, and they are a necessity if we are to bring inflation back down to our 2 % target. as a result, we see economic growth in the netherlands slowing down. at the same time, the labour market is expected to remain tight in the coming years, keeping unemployment low. this persistent tightness is contributing to higher wage growth and the gradual pace at which inflation is normalising. risks inherent in transitioning to higher interest rates the rapid transition to higher interest rates also changes the risks to financial stability. in themselves, the higher rates have a positive impact on the financial system. for example, the increase in bank profits and higher funding ratios at pension funds show that higher interest rates are in principle beneficial for financial institutions. likewise, investors in financial markets seem to have been pricing in risk again recently, reducing their incentives to invest in riskier asset classes. but there is always a flip side : in fact, the transition to higher interest rates may also expose accumulated vulnerabilities and create new risks to financial stability. let me highlight two key examples of such risks, which are also discussed in the financial stability review. first of all, the transition to higher interest rates impairs the sustainability of government debt, as higher rates cause sovereign debt to weigh more heavily on government budgets. this also applies to netherlands, although its government debt is still relatively low. adjustment is needed to ensure future compliance