jean - claude trichet : the regulatory and supervisory reform in europe speech by mr jean - claude trichet, president of the european central bank, at the eurofi financial forum 2009, gothenborg, 30 september 2009. * * * ladies and gentlemen, it is a pleasure to be here among you and to say a few words of introduction before this distinguished panel. the purpose of my intervention is to lay out the main issues for our discussion. • substantive progress has been made in the regulatory and supervisory reform as a response to the financial crisis. a remarkable amount of technical work has been undertaken in a demanding timeframe. • all relevant initiatives have been coordinated globally, and the european union has been a frontrunner in a number key areas. let me mention three of them : credit rating agencies, hedge funds and compensation practices. • on credit rating agencies, the eu has already adopted regulation that will subject credit rating agencies to mandatory registration and oversight, to increase transparency and reduce conflicts of interest in the rating process. • with regard to hedge funds, the european commission has proposed a directive on alternative investment fund managers. this proposal, which is currently under debate, provides that alternative investment fund managers be subject to authorisation and harmonised regulatory standards, including minimum capital, as well as disclosure requirements. • on compensation practices, the european commission was among the first to incorporate in a directive the principles developed by the financial stability board ( fsb ) for sound compensation practices. moreover, the eu has been driving the international agenda in developing further implementation standards that will align compensation practices with long - term value creation, and discourage excessive risk - taking in the short - term. as a result, the g20 summit in pittsburgh calls on banks to defer bonus payments, disallow guaranteed bonuses, and introduce a claw - back clause. • overall, agreement has been reached globally on a comprehensive set of measures in response to the crisis. the capital framework has been strengthened by introducing stricter requirements for the treatment of securitisation exposures and off - balance sheet vehicles, as well as for credit risk in the trading book. disclosure requirements have been improved, to reduce uncertainty about banks ’ overall exposures in these areas. guidance has been published to address the shortcomings in banks ’ risk management practices. finally, international cooperation has been very strongly reinforced and supervisory colleges for large complex financial groups have been established. while a lot has been achieved, a lot remains to be done. this is no time for

g., galesi, a., perez - quiros, g. and sentana, e. ( 2018 ), “ the rise and fall of the natural interest rate ”, working paper series, no 1805, center for monetary and financial studies ; geiger, f. and schupp, f. ( 2018 ), “ with a little help from my friends : survey - based derivation of euro area short rate expectations at the effective lower bound ”, discussion paper series, no 27, deutsche bundesbank ; holston, k., laubach, t. and williams, j. c. ( 2017 ), “ measuring the natural rate of interest : international trends and determinants ”, journal of international economics, vol. 108, supplement 1, s59 - s75 ; jarocinski, m. ( 2017 ), “ var - based estimation of the euro area natural rate of interest ”, mimeo, ecb ; and johannsen, b. k. and mertens, e. ( 2018 ), “ a time series model of interest rates with the effective lower bound ”, bis working papers, no 715, bank for international settlements. [ 8 ] see coenen, g., montes - galdon, c. and smets, f. ( 2020 ), “ effects of state - dependent forward guidance, large - scale asset purchases and fiscal stimulus in a low - interest - rate environment ”, working paper series, no 2352, ecb. [ 9 ] see ehrmann, m., gaballo, g., hoffmann, p. and strasser, g. ( 2019 ), “ can more public information raise uncertainty? the international evidence on forward guidance ”, journal of monetary economics, vol. 108, pp. 93 - 112. this paper reviews the experience of major central banks with deploying rate forward guidance based on different forms of conditionality – open - ended, time - based over short / long horizons and threshold - based – and provides an assessment of its effectiveness by comparing the impact on the responsiveness of bond yields to macroeconomic news. [ 10 ] since the refinancing rate in the tltro programme is linked to the policy rate for the main refinancing operations, the attractiveness of tltro funding conditions also adjusts in response to these shifts in market expectations. [ 11 ] for example, in zlobins, a. ( 2019