john hurley : comments on the financial crisis address by mr john hurley, governor of the central bank & financial services authority of ireland, at a lunch meeting of eu ambassadors to ireland, dublin, 27 april 2009. * * * among governor hurley ’ s comments at the event were : the global economy is currently experiencing the deepest and most synchronised downturn for many decades. in its latest economic outlook, the international monetary fund has forecast a contraction in global activity of around 1½ per cent this year. we have seen a small improvement in some economic indicators internationally in recent weeks, but i have to say that, at this stage, these remain more consistent with further contractions in output – albeit at a slower pace – rather than actual growth. while the fund has forecast very modest positive growth at the global level for next year, the recovery may be rather gradual. on the other hand, global inflationary pressures have moderated significantly since the middle of last year. the euro area headline rate was 4 per cent as recently as last july but has now fallen to below 1 per cent. this easing initially reflected a sharp decline in commodity prices – oil prices fell by over $ 100 per barrel in the second half of last year – but the impact of the downturn on prices is increasingly playing a role. reflecting these developments, headline inflation could turn negative in a number of advanced economies this year. this is a development that is likely to last for a number of months in the case of the euro area, before there is a return to moderate rates of positive inflation. policymakers have taken unprecedented steps to limit the impact of the current downturn. these have included financial sector intervention, as well as monetary and fiscal policies. a very wide range of measures has been taken to support financial institutions. these include recapitalisations, deposit guarantee extensions, debt guarantees, extensive provision of credit and liquidity, and acquisition or ring fencing of bad assets. as the global outlook has continued to deteriorate, many countries have also introduced significant wider fiscal measures to support the economy. as far as monetary policy is concerned, central banks have cut policy rates significantly – in many cases to unprecedented levels – and have taken a range of unconventional measures. this has led to a sizeable expansion of central banks ’ balance sheets, including the ecb ’ s. in particular, it is worth noting that euro area banks have been permitted to borrow an unlimited amount at the relevant policy rate against eligible collateral for some time now

two building blocks. not only does this piece of legislation introduce the “ european covered bond ” seal of approval, it also ﬂags a premium segment to which the pfandbrief of course belongs. the harmonised deﬁnition aims to promote the stronger use of covered bonds as long - term sources of funding across europe, enabling investors to reap the beneﬁts of these debt securities on a larger scale. because the markets for covered bonds are not all as well developed as they are here. all this may well provide the german pfandbrief with a further impulse of internationalisation, following the initial surge when the jumbo pfandbrief was introduced in 1995. https : / / www. bundesbank. de / en / press / speeches / consistency - as - a - mandate - 816296 7 / 9 11 / 29 / 2019 consistency as a mandate | deutsche bundesbank at this point, i would like to add the following remark : the fact that the pfandbrief became – in dr hagen ’ s words – an “ export hit ” is not solely attributable to the product itself. it is also a great achievement of the association of german pfandbrief banks, or vdp, and its sustained efforts at the national and international level. the eu framework for covered bonds and the aforementioned taxonomy for sustainability are two steps towards a real capital markets union. however, it appears that europe still has obstacles to overcome on its way to better access to funding and a wider dispersion of risk in the private sector. in my view, the area of insolvency proceedings could be key to a deeper integration of the european capital market. this area still lacks a harmonised approach – not least because it is often closely intertwined with other aspects of national law. a complete harmonisation of insolvency proceedings is therefore rather unrealistic. however, maybe that is not necessarily what is called for. much the same as the covered bond framework, minimum requirements across europe would be a pragmatic ﬁrst step. a clear and sound legal basis for securities, in particular, is important if we want to protect issuers and investors. this has also stood the pfandbrief in good stead. time and again, the pfandbrief has been able to adapt to new circumstances and overcome challenges over the years. but amidst all the change, it was essential that the