tendency of many of those participants to minimise the distinction – which is standard in the anglo - saxon debate – between “ goal dependence ” and “ instrument independence ” is probably dictated by the idea that the scope of delegation to an unelected agency should be as limited as possible. was the ecb well advised to take seriously the “ goal dependence ” principle that presides over the high - level agreements between parliaments and central banks, which assign many central banks in the world with the task of delivering a certain definition of price stability within a meaningful medium - term time frame? and, in that endeavour, did the ecb do the right thing when it claimed “ instrument independence ”, within the confines of the treaty stipulations, when delivering on its objective by using conventional instruments was no longer a viable option? in attempting to answer these questions, let me take a step back. over the past decades, a clear consensus has emerged that price stability is the sole, or at least the primary, responsibility of a central bank. this is what we call “ goal dependence ” : central 1 / 8 bis central bankers'speeches banks did not – and should not – choose their ultimate goal. their ultimate goal – price stability – is stipulated by legislatures which express the collective will of society. in many countries in the world the precise formulation of that assignment has been elaborated with welfare and feasibility considerations in mind. among all the public policy goals that are most relevant to furthering the welfare of the public, central banks were given the mandate to stabilise inflation around a sufficiently low level over the medium term. the welfare considerations are simple to explain. price stability is the foundation of a functioning economy. price stability ensures that the market mechanism can work properly. it supports correct market signals, contributing to an efficient use of economic resources and strengthening job creation and prosperity. it preserves the purchasing power of our money and the value of our savings. it is a common good for the whole economy. it is worth remembering that these welfare propositions are not just abstract theory. germany ’ s history, in particular, has taught us that monetary disorder undermines not only economic prosperity, but also political stability. this aspect concerns not just the hyperinflation of the 1920s that has been etched so indelibly onto germany ’ s collective memory. in the wake of the wall street crash in 1929 and the banking crisis starting in 1931, monetary mismanagement led to a precipitous collapse in money, prices

specific implications that follow from this : first, this case by case approach will only work if the situation of unsustainable mortgages is addressed properly. as a result, the boards of directors and senior management of the lenders will be required by the central bank to formally reassess their approach to unsustainable mortgages. second, the banks ’ own actions need to take care not to exacerbate the arrears problem. this speaks to the exact design and calibration of any new rescheduling or modification techniques. also, continuing standard variable rate increases risk making the situation worse – and prompting the introduction of new powers to impose restrictions on the banks ’ rate setting ability. third, the banks need to have the operational capacity – including structure, resourcing and senior sponsorship – to address the arrears problem effectively, implementing best practice, rigorously tackling all the dimensions of the problem and ensuring compliance with the code. we have this week communicated directly with the senior management teams at the major lenders to set out our expectations in these areas. i will be writing shortly to their chairmen as well to emphasise that the boards of directors must take personal responsibility for approving and monitoring implementation of these strategies. as i have explained today, the central bank ’ s supervisory and enforcement strategy is aligned to deliver these outcomes from the mortgage lenders. we are gearing up for an intensive period of supervisory engagement, breathing down the necks of the banks to ensure that progress is made. in the short term, we are signalling a lack of tolerance with harassing behaviour and are inviting information from the public to assist our enforcement work. in the medium term, we will consider enforcement action on other aspects of the code or where our expectations have not been met. there are two final points i would like to underline from my remarks. it is important to emphasise that in addition to accelerating their work on mortgage arrears, the banks must also be required to prudently conserve their financial resources. following their recapitalisations earlier this year, the irish banks have more capacity to address individual arrears cases, but it is important to be very clear that neither the banks nor the taxpayer have unlimited financial resources. what is needed is a careful husbanding of financial resources to apply to cases of genuinely unsustainable mortgages. this is a difficult balancing act, but one that cannot be avoided. my final conclusion is to highlight the importance