benoit cœure : european ccps after brexit speech by mr benoit cœure, member of the executive board of the european central bank, at the global financial markets association, frankfurt am main, 20 june 2017. * * * thank you for inviting me here today. in my short remarks i would like to say a few words about a topic that has received much attention lately : central clearing, and its importance for central banks in the context of brexit. the extensive coverage of central counterparty ( ccp ) clearing in the press and other media these days shows how critical these infrastructures have become since the financial crisis. it is easy to see why ccps have become so important for financial stability. they helped fix a major defect in our financial system, namely the reliance on, and associated counterparty risk of, opaque bilateral over - the - counter trading of derivatives. in our highly interconnected markets, ccps have thus become effective vehicles for reducing systemic risk in our financial system. and in doing so, they play a key part in ensuring that central banks are in a position to pursue their primary objective : price stability. our challenge today is to ensure that ccps do not themselves become a risk to financial stability and, hence, generate potential impediments to the transmission of monetary policy. ccps have grown in scale and scope to the extent that a disruption affecting a major ccp would have a significant impact on banks, markets and the instruments we rely on to perform our core central banking activities. 1 for example, many of our key monetary policy counterparties in the euro area are participants in ccps around the world, and are thus directly exposed to potential strains in centrally cleared markets. asset classes such as repos, which play a direct role in our monetary policy operations, are increasingly being cleared through ccps. any closure of certain repo market segments due to a ccp failure would therefore inevitably limit our ability to align money market conditions with our monetary policy intentions. moreover, financial stress resulting from a struggling ccp could have a knock - on effect on the smooth operation of payment systems, with obvious and probably serious consequences for the real economy. in a severe crisis, we might even be expected to extend emergency lending to a failing ccp or to its participants although this would only be done at our own discretion : an automatic right to central bank liquidity could create serious moral hazard concerns. 2 in short, the safety and soundness of ccps matters

have to lead not only by words but by example. incentives are another important point. staff will know which behaviour earns them a bonus or gets them promoted. that ’ s why european banking supervisors assess remuneration schemes, including the extent to which integrity matters in promotions. more generally, integrity is one of the five criteria we apply when conducting fit and proper assessments of potential bank managers. and this is key. culture tends to be self - perpetuating, because people with certain values tend to hire people who hold the same values. breaking this cycle is difficult, but necessary. but simply hiring people with different values and perspectives will not suffice. they then must be encouraged to speak up – to call foul when necessary. here, we supervisors can help again. the ecb has set up a breach - reporting mechanism through which whistle - blowers can share information with us. last year, we received more than 120 reports, an increase of about 40 % from 2017. so, there are things that can be done, but we should not expect miracles. culture is a sticky thing that tends to change very slowly. i am sure it will keep us busy for some time to come. 5 / 6 bis central bankers'speeches conclusion ladies and gentlemen, this is it ; this is how the banking world looks from a european point of view. banks have become more resilient over the past years, but they still face a number of risks and challenges. some of these risks and challenges are indeed european, but some are global in scope. and a number of risks are universal in the sense that they emerge from within a bank : weak governance, bad risk management, unethical behaviour. so plenty of work lies ahead for banks and supervisors. but for now, i am looking forward to listening to you, and to discussing our thoughts and ideas. thank you for your attention. 1 european commission ( 2018 ), annual report on european smes 2017 / 2018, november. 2 european commission ( 2018 ), survey on the access to finance of enterprises ( safe ), november. 3 holton, s., mccann, f. ( 2017 ), “ sources of the small firm financing premium : evidence from euro area banks ”, working paper series, no 2092, ecb, august. 4 the report is available on the ecb ’ s banking supervision website. 6 / 6 bis central bankers'speeches