speech international trends in central bank independence : the ecb ’ s perspective remarks by yves mersch, member of the executive board of the ecb and vice - chair of the supervisory board of the ecb, roundtable discussion on central bank independence frankfurt am main, 12 november 2019 ladies and gentlemen, the topic of central bank independence has received renewed attention in recent years. today, i will present the institutional set - up that underpins central bank independence in europe, as well as accountability and transparency, since these things go hand in hand. central bank independence in the european system of central banks i will start with the principles of independence and accountability that apply in the central banking context – which we have to differentiate from the supervisory one. the legal foundation of central bank independence, which applies to both the ecb and the national central banks ( ncbs ), is established at the highest possible level in european law. it is enshrined in primary law, in the form of the treaty on the functioning of the european union and the statute of the european system of central banks ( escb ) and of the ecb. since primary eu law can only be modified with the agreement of all ( currently 28 ) member states, this independence enjoys quasi - constitutional status. ecb independence consists of four important pillars – institutional, functional, personal and financial independence. article 130 of the treaty is the most important provision from the perspective of independence, guaranteeing institutional independence. it works in two ways. first, it prohibits the ecb, the ncbs and the members of their decision - making bodies from seeking or taking instructions from eu institutions or bodies, from any member state government or from any other body when exercising the powers and carrying out the tasks and duties conferred upon them by the treaties. second, it stipulates that eu and national authorities must respect this independence and not seek to influence the members of the ecb ’ s or the ncbs ’ decision - making bodies in the performance of their tasks. the second pillar of independence is functional independence. the ecb has been given the autonomy to determine which policy tools to use to achieve its primary objective of price stability. it has sole competence to decide which means and instruments are most appropriate to help it achieve its aims – such as outright purchases, the establishment of the collateral framework, and the designation of its counterparties. as part of this functional independence, ncbs must have the necessary means and instruments to achieve the escb ’ s objectives independently of

for the subsequent reconstruction of these buffers, in the event they are used. fourth, the european financial authorities, including the banco de espana, have recommended that banks temporarily eliminate dividend payouts and that they apply prudent criteria in the variable remuneration of their staff. the aim is to channel the resources generated towards strengthening their capital positions. these measures will be reviewed before the end of the year. in any event, however, banks ’ dividend payout and staff remuneration policy should continue to be highly prudent until the current uncertainty clears and a sound economic recovery takes root. fifth, there has been a regulatory reform of capital requirements ( known as quick fix ). the fix includes permanent measures, such as adapting the sme support factor in the calculation of risk - weighted assets, and temporary measures, such as the application of a prudential filter to changes in the value of sovereign debt instruments. as a result, banks ’ shock - absorption capacity has been enhanced and, in turn, assistance has been given to financing to firms and to the investments that may be most affected. this response by the prudential authorities, along with the monetary and fiscal policy measures adopted, has allowed the initial impact of the shock to be absorbed, it has smoothed the provision of credit to the economy and it has prevented the materialisation of see the speech by the governor of the banco de espana “ retos y politicas para la estabilidad financiera ante la pandemia ”, october 2020. a systemic risk in the financial system that would have heightened the crisis further and made it more persistent looking ahead, however, set against the uneven and uncertain recovery i described earlier we cannot rule out two outcomes : that the risks identified materialise, and that their impact and persistence are greater than expected. in this respect, the economic and supervisory authorities must continue to closely monitor banks and financial markets so that they may continue providing the necessary flow of credit to the economy. we must continue adopting measures to mitigate the risks and, naturally, we must stand ready to respond appropriately should these risks materialise. in the banking area, this response can only be pan - european, given the commitment to the banking union and the need to avoid the financial fragmentation problems that might stem from an exclusively national response. european fiscal policy the ecb ’ s monetary policy measures and action taken by the regulatory authorities have been forceful, aimed at delivering a common, truly european,