jean - claude trichet : the great financial crisis – lessons for financial stability and monetary policy introductory remarks by mr jean - claude trichet, president of the european central bank, at the colloquium in honour of mr lucas papademos, vice - president of the european central bank, frankfurt am main, 20 may 2010. * * * ladies and gentlemen, introduction the subject of this colloquium – “ the great financial crisis ” – could be no other since lucas papademos ’ tenure will be remembered for the immense challenges for financial stability and monetary policy that have arisen since the trigger of the subprime crisis in 2007. lucas played a key role at both the global and european levels in tackling these challenges. he was among those who were prescient about the considerable build - up of risks in the years before the crisis. he placed significant efforts in developing and adapting financial stability analysis to the fundamental and far - reaching changes in the financial system we have witnessed in the past decade, particularly as a result of increasing financial integration and innovation. when the crisis unfolded, lucas was one of the foremost policy - makers in devising the actions required to stabilise the financial system. he also played a substantial part in setting the ground for regulatory reform, namely through his participation in the financial stability forum, later board, and in several european and eurosystem fora, a number of which he chaired himself. i am therefore delighted that we were able to organise this colloquium with such a set of distinguished speakers, all of which have their exceptional professional standing deeply associated with the financial crisis, either as policy - makers, crisis managers, academics or proponents of regulatory initiatives. my introductory remarks this afternoon are organised around the title of this colloquium. my aim is to review policies in the last few years and draw some policy conclusions. i will first touch upon some of the lessons for financial stability, where lucas ’ s contribution was especially important, as responsible for the financial stability function, and then turn to the experience with monetary policy. lessons for financial stability the financial crisis erupted in august 2007, when off - balance sheet vehicles that had been set up by banks to manage portfolios of complex structured credit securities ran into funding liquidity problems. although initially a liquidity squeeze, concerns about counterparty credit risks quickly spread as uncertainties intensified about the nature and extent of exposures of banks to what we now call “ toxic assets ”. and, as

risks to price stability, they ensured that the easing of the monetary policy stance was transmitted into a broader easing of financing conditions. in particular, the ecb expanded scope for central bank intermediation of transactions between banks, thereby offering an alternative to the malfunctioning private inter - bank money market. at the same time, the measures supported financial stability objectives by containing and mitigating the systemic consequences of liquidity tensions in the money market. to conclude, let me say a few words on the recent decisions of the governing council taken on 9 may and announced on 10 may. as i already said publicly, i will sum up in five points the governing council ’ s position. 1. the ecb is fiercely independent and takes all its decisions independently of governments, social partners and pressure groups of any nature. 2. we are inflexibly attached to price stability, our primary mandate. our successful track record since the inception of the euro is remarkable. 3. our present monetary policy stance is appropriate. our decisions taken on 9 may have confirmed it. we are not engaging in any form of “ quantitative easing ”. 4. the “ securities markets programme ” is designed to ensure an effective functioning of the monetary policy transmission mechanism by helping to resolve a malfunctioning of some segments of the euro area debt securities markets. 5. the liquidity provided through this programme is withdrawn in its entirety through tenders of term deposits. conclusion i would like to end my remarks by acknowledging the outstanding contribution that lucas has made to the conduct of monetary policy and the safeguarding of financial stability in these demanding and historic times, as i have just described. i cannot stress enough the important role he has played at the ecb, as well as in europe and globally, to successfully ensure the sound pursuance of these essential policies, ultimately for the benefit and well - being of the societies and citizens which we serve. we are all very grateful to lucas.