gertrude tumpel - gugerell : the role of retail finance for financial markets efficiency and stability speech by ms gertrude tumpel - gugerell, member of the executive board of the european central bank, at the eleventh conference of the ecb - cfs research network, prague, 20 october 2008. * * * introduction it is for me a real pleasure to speak here in prague at the european central bank and centre of financial studies research network conference. i would like to thank the organizers of the conference for compiling a very interesting and stimulating program. my special thanks go to our host, the czech national bank, for the very good cooperation and for an outstanding local organization of this conference. being here in prague, i was reminded that joseph schumpeter was born not too far away from prague in a small town named trest. it was joseph schumpeter who once said that “ economic progress in capitalist society means turmoil ”. it would be, of course, unfair and undue reference to associate schumpeter ’ s notion of turmoil with the current period we are experiencing in financial markets. in my speech today, i would like to focus on the retail banking sectors ’ contribution to efficiency and stability in financial markets also in light of the ongoing financial market turbulences. i will also stress the importance of retail payment infrastructures, and particularly the issue of harmonisation and integration as it underlies the single european payment area ( sepa ) project as a fundamental basis for the efficiency and stability of the european retail finance market. 1. the role of retail banking for economic development and monetary policy ( i ) retail banking plays a crucial role in fostering economic activity retail banking is the backbone of banking activities. retail sector banks, in particular, have the expertise to provide credit to small and medium - sized enterprises ( or smes ) and to evaluate the associated risks. as smes are the main engines of job creation and economic growth, they are also important drivers of innovation in the economy. therefore, an efficient and stable retail banking business is needed for the financing of sme activities. as these firms do not have access to global capital markets, they are heavily dependent on banks for their funding. this is particularly true for european smes, as the european market for venture capital remains very small compared to the one in the us. the availability of bank credit is, thus, crucial for sustained investment of firms and, therefore, plays an important role for economic development and growth

. one such challenge is population ageing. although ireland ’ s demographics are currently relatively favourable, changes in the demographic structure of the population will occur over the coming decades. it is estimated that the number of people of working age for each person aged over 65 will halve from around four currently to just over two in 2050. 10 this will require increases in expenditure in areas such as pensions and healthcare. meanwhile, an older population and reduced labour supply would, all else equal, result in slower economic growth which will weigh on government revenue. productivity growth will remain key to ensuring sustainable growth in light of population ageing. addressing the fiscal challenges created by an ageing population as well as other existing and newly emerging priorities will require choices. careful management of the public finances over the medium term, with a focus on ensuring sustainable supply - side conditions, remains crucial for the irish economy. the sooner we take action related to the longer - term challenges that we know we are facing, the lower the ultimate cost will be. and the sooner we get to grips with the challenges we know about, the more resilient we will be to the future challenges which happen to be unknown today. conclusion so in conclusion, despite the challenges and uncertainties we face, the outlook for the irish economy is broadly positive. as ever, important policy decisions will need to be made in the months and years ahead. the central bank of ireland will rise to the challenges and we will continue to make our decisions based on the available evidence and careful analysis, and in the interests of the community as a whole. i look forward to the discussion. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1 monetary policy report may 2022, bank of england inflation is projected to moderate to 2. 8 per cent in 2023 and 2. 1 per cent in 2024. 3 lydon, r., 2022. household characteristics, irish inflation and the cost of living. central bank of ireland, economic letter, vol. 2022, no. 1. 4 donnery, sharon. remarks to the irish economic association annual conference, on the occasion of the irish society for women in economics ( iswe ) launch. 6 may 2022. boyd, byrne, keenan and mcindoe - calder ( forthcoming ). pandemic puzzles : labour force recovery after a pandemic. quarterly bulletin signed article. 6 makhlouf, gabriel. inflation dynamics in a pan