benoit cœure : risks in central counterparties ( ccps ) speech by mr benoit cœure, member of the executive board of the european central bank, at the policy panel during the conference “ mapping and monitoring the financial system : liquidity, funding, and plumbing ”, organised by the office of financial research and financial stability oversight council, washington dc, 23 january 2014. * * * i would like to thank andreas schonenberger for his contribution. i remain solely responsible for the opinions contained herein. accompanying slides can be found on the european central banks ’ website : http : / / www. ecb. europa. eu / press / key / date / 2014 / html / sp140123 _ 1. en. pdf. ladies and gentlemen, i am delighted to participate in this policy panel today on a topic of high importance to the ecb from the perspective of monetary policy implementation, financial stability, and banking supervision. central counterparties ( ccps ) play a key role in the financial markets by managing and structuring a complex web of counterparty risk. as such, risks in ccps are of interest to ccps themselves, their clearing members and the regulators who supervise them. what i would like to do in my brief introductory remarks is therefore not only to focus on the risks in ccps, but also and importantly on the risk of ccps. the growing importance of ccps certainly brings a number of important benefits that alternative bilateral arrangements could not do to the same extent. however, the rise of central clearing may also be accompanied by some unintended side effects that need to be addressed. the growing importance of central clearing first, however, let me illustrate the growing importance of central clearing on the basis of some figures [ slide 2 ]. the figures show the importance of ccps already today for interest rate and credit derivatives in europe. there are also ccps for cash products and the role these ccps would play for collateral pools of triparty repos is of increasing importance. with the forthcoming implementation of the central clearing requirement for standardised otc derivatives contracts, the volume of transactions cleared by a ccp will rise significantly also in that market segment over the coming years [ slide 3 ]. a recent quantitative impact study run by the working group on margining requirements of the basel committee on banking supervision ( bcbs ) and the international organization of securities commissions ( iosco ) estimated that the global volume of centrally cleared otc derivatives could rise from a

monetary policy ladies and gentlemen given large central bank holdings of sovereign bonds and elevated government debt, the monetaryﬁscal interaction has become a strategic issue. it is therefore also a subject for the eurosystem ’ s monetary policy strategy review. this process is broad - based, without prejudging the outcome. what is ﬁxed is our mandate : our primary objective is to maintain price stability in the euro area. the question is how we are best able to fulﬁl this mandate in future. we are in the middle of the debate at present. it is too early to draw any conclusions. but let me share some thoughts on three issues we are looking at : the clariﬁcation of the monetary policy aim, the implications of a makeup strategy, and the measurement of inﬂation. 4. 1 definition of price stability and policy aim questions of deﬁnition often tend to be perceived as a boring formality. that is not the case in monetary policy. here, the deﬁnition of the aim is of central importance, because it forms the heart of the strategy. this is where inﬂation expectations should be anchored – not only for the ﬁnancial markets, but also for enterprises and households. https : / / www. bundesbank. de / en / press / speeches / too - close - for - comfort - the - relationship - between - monetary - and - fiscal - policy - 850120 6 / 11 11 / 5 / 2020 too close for comfort? the relationship between monetary and fiscal policy | deutsche bundesbank thus far, we have deﬁned price stability as annual inﬂation rates between zero and 2 %. within this range, the ecb governing council aims to keep inﬂation rates in the euro area below but close to 2 % over the medium term. even many experts are not familiar with this distinction between the deﬁnition of price stability and our policy aim. this suggests that our strategy should be made easier to understand on this point. the desired inﬂation rate is also something we will discuss in the governing council. we should take due account of the fact that there are several design features which could inﬂuence the level of actual inﬂation. for example, strengthening the symmetry of our aim could raise the average expected inﬂation rate. so far, the policy aim has been close to the upper edge of the range of price stability. fairly small upward deviations would violate the