as an inefficient use of shareholders ’ money. the underlying perspective can be compared to that in the corporate sector many years ago, when technological innovation led to the widespread introduction of the “ just - intime ” model of doing business. this meant that firms held minimal inventory levels throughout the production chain. the result was a system that looked very efficient but that was very vulnerable to shocks. something similar has happened to the financial system in recent years : the pressure to increase immediate shareholder value and short - term returns drove a number of institutions to limit their reserves and buffers to the minimum possible levels. and just as in manufacturing, the result has been a system that produced very high returns in the short term, but which proved vulnerable to shocks. comparing the ex post returns with the considerable costs of the current turmoil, we have to realise that our financial system as a whole, including its non - regulated and non - listed entities, was neither strong nor efficient. it did not allocate capital properly, and it did not manage risks well. i have sometimes compared financial buffers with air bags in a car : what we have done in recent years is let part of the financial sector remove all the air bags. and now there has been an accident, we can see the scale of the injuries. we have to put reserves and buffers back into the system ; they are the protection against serious damage in a downturn, and they are an integral part of sound finance. such a large - scale reassessment is a matter for the medium term. in the present circumstances i wish to underline that banks should not be requested to hold more capital than is required by the existing capital framework. we should not today introduce “ pro - cyclical ” changes in the regulatory framework at a time when we are already observing a market - driven deleveraging of the first magnitude. 3. the third goal is reforms that are holistic in scope. in this respect, an important issue, which i ’ m sure will be addressed by today ’ s conference, relates to the scope of financial regulation and prudential oversight. the current crisis is a loud and clear call to extend regulation and oversight to all systemically important institutions – notably hedge funds and credit rating agencies – as well as all systemically important markets – in particular the otc derivatives market. what is currently under discussion is the precise way in which these elements should be integrated into an overall regulatory framework. currently, we are in

benoit cœure : outlook for monetary policy in the euro area speech by mr benoit cœure, member of the executive board of the european central bank, to the association d'economie financiere, paris, 2 february 2017. * * * introduction in my remarks tonight, i would like to discuss the outlook for monetary policy. as you will be aware, the governing council decided in december to extend the asset purchase programme with average monthly purchases of €60 billion from april this year until december 2017 or beyond, if necessary, and in any case until the governing council sees a sustained adjustment in the path of inflation consistent with its inflation aim. that decision was confirmed at our january meeting. the decision to extend the asset purchase programme was based on our assessment of the current economic climate, and our view of the amount of stimulus required to reach our inflation objective. before i discuss those points in a little more detail, allow me to refresh your memories of the events that have unfolded since the crisis. in particular, i ’ d like to briefly recount why unconventional monetary policy measures became necessary, and how the ecb has responded to the crisis. why unconventional measures became necessary the need for unconventional policy measures in the euro area arose from the confluence of a number of factors. broadly speaking, these factors fall into three categories : 1 ) weak domestic demand and the impairment of the monetary policy transmission mechanism arising from the financial and sovereign debt crises ; 2 ) other factors weighing on inflation, notably energy prices ; 3 ) the decline in equilibrium real interest rates. weak domestic demand and impairment of monetary policy transmission let me start with the financial crisis, which entered a particularly acute phase following the collapse of lehman brothers in september 2008. the ensuing severe recession across the euro area increased unemployment and, combined with falling real estate prices, caused large losses in many national banking sectors. the financial crisis was exacerbated by the banking - sovereign nexus, sometimes called the diabolical loop. the large overhang of public debt in some countries, in part a result of the support provided to their banking systems, resulted in a marked widening of sovereign spreads. markets began pricing in some risk of redenomination : in other words, the risk that certain countries would leave the euro area and revert to national currencies. at the same time, bank holdings of sovereign bonds came under increasing market scrutiny. interbank lending markets in the euro area became fragmented and certain national banking systems lost access to