not have any binding powers but will have to rely on moral suasion and peer pressure for the follow - up to its risk warnings and recommendations. and finally the esrb will have to strive for effectiveness and efficiency in the pursuit of its tasks, given its relatively wide composition ( over 60 members ). v. a look into the future taking a forward - looking perspective, i am sure that one of the important topics that will be on the esrb ’ s agenda is that of the systemically important financial institutions ( sifis ). these institutions are major contributors to what in the financial jargon is known as “ systemic risk ” and are, therefore, of great interest to macro - prudential supervisors. how to gauge the contribution of a financial institution to systemic risk, in other words how to identify a sifi, is a very difficult task, not least because of data limitations. nevertheless, there are a number of factors that seem to be particularly relevant, such as the size of the institution, its interconnectedness with the rest of the financial system and the degree of substitutability in the event of a failure of the critical services they provide. it is clear that any such assessment cannot be exclusively based on a quantitative approach. rather, the informed judgment of the relevant authorities, guided by internationally agreed principles, will play an important role. indeed, the concept of systemic risk is fuzzy and still under debate, but, with a certain degree of simplification, it can be defined as the risk of an impairment in the financial system that has potentially serious negative consequences for the real economy. for example, the actual default of a major bank may seriously affect depositors ’ savings ( though reimbursement up to the insured level of retail deposits is to be provided by deposit insurance schemes ) and the financing of otherwise profitable investment projects. but even in case of no actual default, sifis may pose serious challenges. because of the potentially high damage to the financial system and the real economy in case of default, there is the expectation that governments and supervisors would not let a sifi fail. this implicit support may provide an incentive to the institution to engage in profitable but risky activities, giving rise to “ moral hazard ”. it also means that a sifi can finance itself at a lower cost compared to other similar institutions, which are not deemed to be systemically important. in short, incentives are misaligned and the playing field is distorted. these problems have

take action? could it still help to make this situation just a little more bearable for millions of europeans? yes, it could take action because it has a capacity of €410 billion. the circumstances are totally different to those of the debt crisis, but clearly an instrument with a capacity of €410 billion is of interest to us. do you think the spanish government ’ s plan is well targeted? do you think it will be helpful? i think so. the €100 billion of guarantees are very significant. the ecb has given banks all the liquidity in the world, one could say. but if the banks are not able to pass this liquidity on to their customers because they have doubts about their customers ’ creditworthiness, then it ’ s all for 1 / 3 bis central bankers'speeches nothing. i think the plan for €100 billion of guarantees is key here, because it ’ s a guarantee for everyone that the ecb ’ s liquidity will actually get to where it needs to go. so yes, this is very well thought out. another important issue is the measures to ensure that the situation regarding workers is flexible during this period. we are going to have a situation where many firms that were perfectly solvent are now struggling. so everything that helps workers, such as the temporary layoffs ( in spanish : expedientes de regulacion temporal, or ertes ) or reduced [ social security ] contributions, is a step in the right direction. overall, i think the government ’ s plan is the right one, it ’ s going in the right direction and i hope everyone supports it. thanks to its deficit, its indebtedness, spain has limited room to activate fiscal measures. given that this is an extraordinary situation, do you think that the eu should set aside the financial orthodoxy of recent years and move towards being more flexible? it ’ s already set it aside, hasn ’ t it? the eu has said that it is not going to apply the stability and growth pact, that there is an escape clause, so governments will be able to spend more. there will be a natural deterioration of public finances. but i say again, this is not like 2008, when there was a severe, long - lasting deterioration. now it ’ s about tackling an emergency, a health emergency, and acting as coherently as possible. the latest measures taken by the european central bank – you mentioned earlier the role your institution has to play during this