sabine lautenschlager : interview in le monde interview with ms sabine lautenschlager, member of the executive board of the european central bank, in le monde, conducted by ms marie charrel on 3 november 2014. * * * on 4 november, the european central bank ( ecb ) assumes responsibility for the supervision of the 120 largest banks in the euro area, which account for 82 % of european bank assets. sabine lautenschlager, member of the executive board of the ecb and vicechair of the new single supervisory mechanism ( ssm ), answers some questions. the ssm starts operations on 4 november. what is the mission of this new institution? our task is to be an intrusive and independent european supervisor which contributes to the safety and soundness of the banking system and the stability of the financial system. our aim is to identify inappropriate risks as well as procedures within credit institutions well in advance and to act in an efficient and timely manner to mitigate them. with the start of the ssm, there will be one supervisory approach in the 18 countries of the euro area – thus, for the first time, creating a supervisory level playing field for banks in the euro area. in our dayto - day business, we will ensure that banks are sufficiently capitalised, that they have sufficient liquidity, and that they have established a governance structure as well as risk control procedures that are appropriate for their activities. the ecb has just published the results of the banking stress tests. is the sector in better shape than it was five years ago? yes. european banks have become considerably more resilient as they have increased their capital stock and strengthened their governance and risk controls. while preparing for the comprehensive assessment, they have also consolidated their balance sheets by up to €200 billion in recent months, selling off assets or issuing new capital. it is therefore fair to say that enormous progress has been made. but nevertheless, there is no reason to be lenient. like an athlete who has to train daily to keep in shape, banks – which operate in a very competitive environment – must permanently work on their business models and strategies to take into account macroeconomic conditions, such as very low interest rates. they need to comply with many new regulatory restrictions, some of them still to come, some of them in transitional periods and not yet fully applicable. until now supervision was conducted by the national authorities, such as the acpr ( the authority for prude

lorenzo bini smaghi : inflation, expectations and current challenges to monetary policy speech by mr lorenzo bini smaghi, member of the executive board of the european central bank, at the european inflation - linked conference 2005, rome, 10 october 2005. * * * ladies and gentlemen, i would like to start by thanking the organisers for the invitation to speak at this european inflation - linked conference. as you know, inflation is the “ enemy no. 1 ” of central bankers. participating in a conference on inflation - linked instruments thus makes me feel a bit like a fire - fighter invited to speak at a convention on home insurance. but rest assured : i won ’ t try to convince you that there is no need for insuring against inflation … but maybe that the premium should be lowered! indeed, we have been experiencing times of historically low and stable inflation, not only in major industrialised countries, but also in emerging markets. 1 inflation expectations are well contained and probably close to their lowest levels of the last forty years. nevertheless, the market for inflation - linked bonds has been rapidly expanding and reached around 800 billion euro worldwide. inflation - linked instruments have become a useful instrument also for central banks, not to invest in but to help measuring inflation expectations, in real time and with high frequency. these expectations are used as an approximation of central banks ’ credibility. i would like to focus my remarks today on how inflation expectations can be useful for the conduct of monetary policy, in particular in the current conjuncture. i would like to start with the current challenges to monetary policy, arising in particular from the recent oil shock. i will then touch on how the central bank and market participants interact in shaping expectations. i will finally try to explain how the institutional framework in which central banks operate affect the way in which they interact with market participants. monetary policy reaction to the current oil shock all industrial economies, and in particular the euro area, are currently facing a major supply shock, stemming from the increase in oil and energy prices. this type of shock is the worse for a central bank, because it affects the price level and income in opposite directions. what is the most appropriate response to such a shock? let me start by an intuitive, but wrong answer, which i would characterise as follows : “ the monetary policy reaction to an oil shock depends on the objective pursued by the central bank. the more a central bank gives priority to fighting inflation, rather than supporting growth, the more it