sabine lautenschlager : interview in der spiegel interview with ms sabine lautenschlager, member of the executive board of the european central bank, in der spiegel, conducted by mr michael sauga on 7 january 2015 and published on 10 january 2015. * * * mario draghi, the president of the european central bank, intends to undertake largescale purchases of european government bonds in order to counter the rate of inflation in the euro area. will you agree to that? inflation in the euro area has been below the targeted rate of just under 2 % for quite some time now, and forecasts for the next few months predict little change. that is why it has been, and continues to be, right and proper for the ecb to discuss appropriate countermeasures. however, i am currently not convinced by large - scale purchases of government bonds. why not? in monetary policy - making, i regard purchases of government bonds as the last resort. in this context, the peculiarities of the euro area as a currency area encompassing 19 sovereign states must be taken into account. there must a threat of exceptional risks materialising, and there must be reasonable balance between the benefits of, and risks entailed in, such a programme. i do not believe that to be the case at present. what we should do instead is wait until the measures that we have put into place only recently can take full effect. despite these measures, which include the negative interest rate on deposits and purchases of securitised private sector credit, december for the first time saw inflation in the euro area drop to below zero. many economists are warning of deflation such as that experienced by the global economy in the 1930s when consumers no longer wanted to buy anything because they all expected prices to continue to fall. isn ’ t that reason enough for decisive intervention? i don ’ t want to gloss over the situation, but you can ’ t speak of deflation at the moment. what we are observing is a persistently low inflation rate that is due, among other factors, to the fact that prices of energy and food have declined significantly. at the moment, however, i cannot see any signs of consumers expecting steadily falling prices and thus changing their spending patterns. the purchases of government bonds are intended not only to raise the rate of inflation, but also to encourage banks, in particular those in southern europe, to again extend more loans to the corporate sector. can that work? i

line / off - line methods and market intelligence to avoid any serious setback to the payment systems. the soundness of retail payment system remains the critical element of the regulatory framework and supervisory policies of central banks and regulators. it is the responsibility of the regulators to ensure that the policies are aligned with the country ’ s economy and its emerging needs without sacrificing the sound principles of safe payment system. another aspect of safety would be the availability of robust business continuity plan ( bcp ) and disaster recovery ( dr ) framework so that critical payment systems remain robust and are able to handle disruptions in efficient manner. suitability although the urge for replicating the successful payment systems of other countries in one ’ s own country is very high, it is necessary to customize the processes and products as per the suitability to the country keeping in view particularly the socio - economic and cultural distinctiveness and the regulatory and institutional aspects regulators need to assess effectiveness of different payment products in their jurisdictions by the authorized entities to ensure that they suit the needs of the common people, the complexities are understood by them and they have inbuilt provision for consumer protection ( principles 21 and 23 of the pfmi ). there should be an institutional mechanism to assess and certify the retail payment products that matches minimum laid down norms by the regulators. regulators also need to keep a check on proliferation of products and systems which are difficult to monitor. the suitability may be assessed from the point of view of the smart principles, i. e., simplicity, manageability, acceptability, risk controls and transparency. standards it is very important to create standards and principles that create a level playing field for the system participants, system providers and consumers. standards like pfmi, basel iii and iso help in creating best practices that act as benchmarks for the players and the industry. bis central bankers ’ speeches standards also reduce discretionary powers leading to fewer disputes and chances of favouritism. while setting standards, we need to be sensitive to the practicality of their implementation. setting higher standards that are not achievable by the stake holders will remain on paper. further, standards need to be flexible to cater changing needs and should not act as barriers for the entry of new payment system players. standards should take into account cost of compliance as that is ultimately passed on to consumers. one example is policy of regulators on default handling and guarantee mechanism ( principle 13 of the pfmi ) applicable for retail payment