. these concern the doubts expressed with regard to the definition of price stability, the importance that the first pillar should be given in our strategy and the role of projections under the second pillar. the governing council of the ecb has defined price stability in the euro area as " year - on - year increases in the hicp for the euro area of below 2 % ", and has stated that " price stability has to be maintained over the medium term ". the definition provided by the governing council ensures accountability and gives clear guidance to expectations of future price developments. the phrase " below 2 % " clearly defines the upper boundary of the rate of hicp increases which is consistent with price stability. this upper boundary is in line with the practice of the national central banks of participating member states before the start of the stage three of emu. in addition, the word " increase " clearly signals that prolonged declines in the level of the hicp index would not be deemed consistent with price stability. there should be no doubt that the commitment of the ecb to maintain price stability is compatible neither with inflation above 2 % in the medium term nor with deflation. in this sense, the monetary policy of the ecb is fully symmetric, fighting both upward and downward pressures on prices which may result in outcomes not in line with our definition of price stability. within our monetary policy strategy, the first pillar assigns a prominent role to money. this reflects the fundamental monetary nature of inflation – as supported by empirical evidence, much of which is available from our working paper series – which indicates a stable long - run demand for m3 and good leading indicator properties of m3 growth for inflation in the medium term. the need to follow monetary developments is therefore key to analysing risks to price stability in the euro area in the medium term. i should also emphasise at this point that the quality of monetary statistics is among the highest of all statistics available in the euro area. these monetary statistics are based on a fully harmonised reporting scheme across all monetary financial institutions in the euro area. the quality of monetary statistics has recently been improved by identifying, as a separate item, non - resident holdings of money market funds. furthermore, we expect that it will be possible for the non - resident holdings of other negotiable paper to be appropriately measured and published towards the end of the year. for all these reasons, m3 will continue to play a prominent role in the monetary policy of the ecb. with regard to the projections, and in

of the planet do not represent a response to a call for “ optimal ” stability, but they have set the basis for an evolutionarily fit regime. it is not just a matter of quantity, as suggested by current arguments about calibration and by newspaper articles focusing on overregulation. confronted with an adaptable financial system, important improvements in supervisory and regulatory regime include : • addressing incoherent regulation across countries and closing regulatory loopholes bis central bankers ’ speeches • extending our supervisory lines of defence to circumvent the risk of putting all our eggs in one basket • exploiting the possible synergies of the supervision in the euro area to make sure that existing incentives match the original intentions the evolutionary approach to financial stability amounts to more than an academic dry run. it shines a light on regulatory strategies which have come about as a high - priced lesson from past crises. financial stability is not a narrow concept and it cannot be achieved through a singular, ideal set of policies and institutions. there is constant evolution wherever we look. instead of directing our energies to identifying some unknown optimal state, we need to strive for plausible processes and a robust set of institutions. the current narratives criticising over - regulation and over - supervision need to reflect these aspects as well. for representatives of the financial industry who are suspicious of overprotective administrative bodies as the force behind recent reforms, the evolutionary perspective should offer some alternative explanations. suffice to say, the precautionary measures that have been taken do not render criticism from the banking industry entirely meaningless. input from the industry is welcome, as this helps to better understand the permanently evolving financial system. but we should be wary of distorted arguments based on partial calculations and a selective approach to the various pros and cons. rather than looking at the status quo and asking whether there has been toomuch or too little regulation and supervision thus far, we should recognise that we have a common interest in achieving better regulation. this is not a matter of mere quantity, but of quality and prudence, too. just as our own health is not defined solely by the number of pills we take, the health of the financial sector, alive as it is, cannot be safeguarded by simply prescribing a narrow set of financial and supervisory remedies. thank you. bis central bankers ’ speeches