gertrude tumpel - gugerell : central banks, liquidity and a changing financial market infrastructure speech by ms gertrude tumpel - gugerell, member of the executive board of the european central bank, at the joint bank of france / european central bank conference on “ liquidity in interdependent transfer systems ”, paris, 9 - 10 june 2008. * 1. * * introduction ladies and gentlemen, i am very pleased to welcome you to this conference and i am grateful that i can do so also in the name of the banque de france. last week we celebrated the 10th anniversary of the ecb and the eurosystem. building on the expertise and reputation of the national central banks of the euro area, the ecb has developed well and we are very proud that the eurosystem as a team has delivered what we were supposed to : we have achieved our main objective of price stability in the euro area and – more closely linked to this conference – the smooth operation of payment systems. given the fast pace of financial markets today, i often feel that the ecb has been around for ages. when i look around this beautiful galerie doree, however, i feel that the ecb is still a very young institution. what i find reassuring is the fact that the euro represents a tangible, perhaps the most tangible, realisation of something that is even older than our conference venue : the idea of europe. please allow me to quote jean monnet : “ lorsqu ’ une idee correspond a la necessite de l ’ epoque, elle cesse d ’ appartenir aux hommes qui l ’ ont inventee et elle est plus forte que ceux qui en ont la charge. ” ( when an idea meets the needs of the time, it ceases to belong to its creators and becomes more powerful than those responsible for it. ) the well - being of europe is closely linked to its economic prosperity. economic well - being, in turn, depends crucially on a functioning financial system. i would like to take the opportunity of opening this conference to reflect on the more long - term trends in the financial sector with a special focus on liquidity in the context of market infrastructures. i will derive challenges from these trends that i think are particularly relevant for transfer systems. finally, i will point out where i see the necessary and adequate responses of the private and public sector to these challenges, in particular the eurosystem

. its decision on these matters must therefore balance the prospect of a more effective restructuring by private firms against the costs that this will impose. private sector solutions have not been neglected in the irish case. to date there has been by considerable deleveraging of the banks to the private sector : asset sales totalling €32 billion in the past three years – most of them abroad. finding grand solutions that improve the situation is thus not easy. but that is not a reason for delay. on the contrary, every month that passes for an un - restructured distressed corporate is an energy - sapping lost opportunity for recovery. urged by the central bank as regulator, the banks have been building their internal capacities through hiring, training and education, to deal with the situation. there is now an improved understanding of how best to deal with the numerous cases of distressed sme borrowers. this includes such matters as collecting adequate borrower information : adopting a realistic approach to post - restructuring viability calculations ; ensuring time - bound execution in accordance with concrete implementation guidelines ; quantified tracking of the progress in processing cases and, procedures for quality assurance. yet the banks know they have not made sufficient progress in turning that understanding into a robust mechanism at scale for delivering an adequate stream of realistic and viable restructurings. it ’ s often not just a question of financial ( balance sheet ) restructuring, but also the need for operational restructuring, which is something which generally goes well beyond the skill - set of the traditional lender. often there is a personal guarantee involved, so the owners will not be fully off the hook : the new personal insolvency legislation should provide a backstop for that element. thousands of cases need to be dealt with decisively in such a manner. this is truly a daunting organisational challenge for the banks, but one to which, encouraged and pressed by the central bank, they are now stepping up. but, as i am sure they will themselves acknowledge, there is much work to be done and progress to date has been painfully slow. bis central bankers ’ speeches given the large number of firms still under pressure, implementation of an effective and speedy but surgical approach to corporate restructuring could have a big impact. by reinvigorating the irish business sector, it would ultimately help boost economy - wide employment. requiring unusual and scarce skills and judgment, this is a task which urgently deserves heightened attention. bis central bankers ’ speeches