regulation and supervision are improved and extended. systemic risk is, generally, outside the control of each individual institution. but, with a macro - prudential framework subjecting all systemically important institutions to a stricter prudential framework, which may include capital or liquidity surcharges, these institutions can contribute to an increase in the resilience of the system as a whole. second, the impact of systemic risk depends very much on the collective behaviour of financial institutions and their interconnectedness, as well as on the interaction between financial markets and the macroeconomy. systemic stability is a public good. the recognition of this public good property underpins the recent emphasis on a macro - prudential approach to regulation and supervision. for this, we need to establish an effective framework for macro - prudential analysis aimed at containing systemic risk. and third, monetary policy concerns and macro - prudential concerns are interconnected. during the recent crisis, financial instabilities spilled over into the real economy with substantial consequences for the risks to price stability. central banks around the world, including the ecb, have reacted to these diminishing risks to price stability by significantly lowering their key policy interest rates. therefore, it appears that in a post - crisis world, financial stability considerations will have to be taken into account to a greater extent in the conduct of monetary policy. new tools may be needed, as well as an organisation of policymaking such that the interactions between macro - prudential regulation and supervision and monetary policy are brought together. allow me to elaborate on this last point. exploring the nexus between macro - prudential regulation / supervision and monetary policy as just mentioned, price stability and financial stability are interconnected. while it is certainly true that financial stability does not necessarily imply price stability and vice versa, the recent crisis has made it clear that large - scale financial instabilities can significantly affect the development of prices in the economy. therefore, a natural question arises as to whether monetary policy and macro - prudential supervision and regulation are related and interlinked with each other. i see monetary policy and macro - prudential supervision and regulation as being linked in two ways. first, monetary policy can have an impact on financial market developments and thus can affect the stability of financial markets. and second, the regulatory framework that governs financial markets can have clear macroeconomic implications – as witnessed in the recent crisis – which may trigger a response with respect to monetary

questions and many more on the potential impact of the regulatory framework on macro outcomes seem to me of high interest for the research community for the years to come and i encourage everyone in the room to develop new analytical tools and models that help to understand this interaction better. the way forward given the interactions and linkages between macro - prudential supervision and regulation and monetary policy, having the task of the former close to or within a central bank is in my view a sensible way forward, not least because central banks have the necessary analytical capabilities to analyse the broad perspective that i outlined earlier. for us, such analysis will be of crucial importance. as you know, a european systemic risk board ( esrb ) will be established with the mandate to map financial risks and their concentration at the system level for the macro - prudential supervision of systemic stability. the ecb will provide the necessary input for the esrb to carry out the work under its mandate. in particular, the esrb will be instrumental in the analysis of systemic risks and will issue risk warnings and policy recommendations to address financial stability concerns. the primary objective of the ecb ’ s monetary policy is to achieve and maintain price stability. this will remain our primary objective and the forthcoming tasks in macro - prudential supervision will not conflict with this objective. in my view, the new macro - prudential task and the existing monetary policy responsibilities can be mutually supportive. in order to achieve this objective and to avoid any potential conflict of interest, it is crucial that the instruments of monetary policy and macro - prudential supervision be clearly separated. our policy rate will be set according to our assessment of risks to price stability and the esrb will issue macro - prudential policy recommendations with regard to financial stability risks. in practice, each of these mandates may involve taking a different path. however, as i mentioned earlier, the roads may cross from time to time. therefore, policymakers need to be aware of the possibility of these paths crossing, i. e. of the linkages and interactions that i have mentioned. let me stress once more that from this point of view, the ecb is in a good position to evaluate the interactions between the two paths. our two - pillar strategy involves the analysis of asset prices as well as the analysis of money and credit aggregates. this may provide useful indications on the nature of the interactions. however, more work is needed to better understand the interactions and to make our analysis more thorough and