benoit cœure : interview with the association of german pfandbrief banks interview with mr benoit cœure, member of the executive board of the european central bank, and the association of german pfandbrief banks, published on 8 may 2019. * * * in what context did you first come across pfandbriefe? before joining the ecb, i spent five years managing france ’ s debt and cash at agence france tresor, the french equivalent of the finance agency in germany. that ’ s when i first came across pfandbriefe as an important building block of europe ’ s fixed income market. what is the importance of pfandbriefe and other covered bonds in monetary transmission? covered bonds play an important role in the monetary policy transmission process, in particular in a traditionally bank - based economy like the euro area. the covered bond purchase programme, for example, has lowered banks ’ funding costs directly and thereby encouraged banks to extend more credit to firms and households at more attractive levels. it was not by chance that covered bonds were the first asset class to be purchased outright by the eurosystem for monetary policy purposes in 2009. in addition, covered bonds make up a large share of the collateral that banks use to borrow funds in eurosystem monetary policy operations, ensuring that banks have access to central bank funding. do you think the harmonisation of covered bonds will be a success? the ecb supports efforts to create a harmonised, high - quality and transparent covered bond market in the european union. the legislative proposal on covered bonds made by the european commission in march 2018 is an important step in that direction, also with a view to promoting a further deepening of the capital markets union. the ecb also sees merit in the proposed directive serving as a basis for new national legislation on covered bonds. finally, the importance of private initiatives to achieve harmonisation should also be emphasised, in particular the covered bond label created by the european covered bond council in 2012. national differences will of course not vanish overnight, but i am confident that practices will increasingly converge across eu countries over time. will innovation, e. g. ” green ” covered bonds transform the market and, if so, how? successful innovations, if managed prudently, have always been important drivers of financial market developments. in the covered bond market, as in other market segments, i see “ green ” covered bonds as a promising innovation and transformation for the future,

non - hqla collateral, after haircuts, to satisfy its additional borrowing needs. bech and keister ( 2013 ) extend a standard model of monetary policy implementation to include the new liquidity regulation and they discuss how different types of open market operations affect bank balance sheets and the lcr calculations ; see m. bech and t. keister “ the liquidity coverage ratio and monetary policy implementation ”, bis working papers, 2013. rochet and tirole ( 1996 ) emphasise the role of interbank peer monitoring in reducing borrowers ’ moral hazard and their excessive risk - taking ex post ; see j. - c. rochet and j. tirole “ interbank lending and systemic risk ”, journal of money, credit and banking, vol. 28, no. 4, 1996. hoerova and monnet ( 2011 ) view market bis central bankers ’ speeches money market ( as demand might not be fully matched by supply ) and segmentation in the market between maturities over and below 30 days. at the same time, by reducing liquidity risk, the lcr may lead to lower liquidity risk premia. the overall effect of these two countervailing forces is unclear though. while there could be an overall impact on the difference between short and longer - term rates, to assess the overall impact on the monetary policy transmission, one would need to see whether the transmission from short to longerterm rates would be also affected. however, it remains to be seen whether unsecured lending beyond 30 days will revive after the crisis. as mentioned, this new set of liquidity requirements is expected to have important consequences for limiting solvency risk and encouraging good risk management. in fact, the regulation is expected to bring an overall positive effect on the functioning of the money market by internalising the negative externalities for financial stability and monetary policy, i. e. reducing information asymmetries concerning banks ’ liquidity risk exposure and their liquidity risk bearing capacity, creating the conditions for a better functioning of the money market. 17 this has to be combined with actions ensuring a proper functioning of the money market ( such as oversight of reference rates along the lines recently proposed by the european commission ). it should also be seen as a complement to regulatory reforms that will improve market discipline in other segments of the banks ’ liability structure, such as capital buffers and the new bail - in rules for senior bond - holders and uninsured depositors. and since