jean - claude trichet : central bank cooperation after the global financial crisis video address by mr jean - claude trichet, president of the european central bank, at the bank of korea international conference 2010 “ the changing role of central banks ”, seoul, 31 may 2010. * * * ladies and gentlemen, first, let me congratulate the bank of korea on its 60th anniversary. the bank has made essential contributions in korea ’ s economic development, the reform of the country ’ s financial system and its integration into the global financial system. the clear focus on controlling inflation and the strengthened independence further buttressed the role of bank of korea in the economy. and recently, the bank ’ s timely and decisive measures helped korea weather the global financial crisis. hence, there are many reasons to congratulate and wish bank of korea a very happy birthday! * * * let me now say a few words about central bank cooperation during and after the crisis, which the bank of korea is so closely involved in. the cooperation among central banks has recently taken numerous forms, such as information sharing and the setting of general standards and rules. such cooperation has been mainly channelled through the various fora at the bank for international settlements ( bis ) in basel. these include the governors ’ global economy meeting and the other committees that meet under the aegis of the bis as well as the financial stability board. the global economy meeting comprises the esteemed governor kim and some 30 other governors from all systemically important economies. it is held every two months in basel and provides a unique opportunity to discuss the global economic outlook, policy challenges as well as any other topics of mutual interest. until january this year, the global economy meeting was primarily concerned with assessing global economic and financial conditions. since then, it was entrusted with an additional assignment : it now provides guidance to, and formally decides on, issues discussed by the various basel - based central bank committees. this responsibility had been in the hands of g10 governors for decades. i have the privilege to chair the global economy meeting and find the frank and in - depth discussions of invaluable importance for my own work and for the central bank community at large. central bank cooperation is part of a more general trend that is reshaping global governance, and which has been spurred by the global financial crisis. one distinctive aspect of this crisis has been its originating in industrial economies. emerging countries have also been severely affected, but as a group remained a source of strength for the

the build - up of household debt all at the same time. in this situation, it is not evident how monetary policy should manage the balance between inflation, economic activity and the risk of an overly rapid increase in housing prices and household credit. let me elaborate on my thoughts a little further here. monetary policy must take financial risks into account the concern over lending to households increasing too rapidly has led to a majority of the members of the riksbank ’ s executive board voting to hold the repo rate at a higher level than would otherwise have been justified. i have entered reservations against these decisions and advocated a lower repo rate, for reasons i will return to later. despite my reservations, i share the majority ’ s concern over the rapid increase in household debt. and i consider that monetary policy should, in principle, take into account financial imbalances and risks that may arise as a result of the monetary policy conducted. in what way is this compatible with the riksbank ’ s mandate? according to the sveriges riksbank act, the objective of the riksbank ’ s activities is to maintain price stability. moreover, the riksbank shall promote a safe and efficient payment system. in addition, the preliminary works to the act state that the riksbank, without prejudice to the price stability target, should support the goals of general economic policy with a view to maintaining a sustainable level of growth and high rate of employment. at the riksbank we consider the task of promoting a safe and efficient payment system to have a broad meaning and that it is, in practice, a matter of taking responsibility for promoting the stability of the financial system. 2 but it is not actually this task that justifies monetary policy taking into account a rapid expansion in household borrowing. it is namely the case that the preliminary works to the sveriges riksbank act emphasise that the monetary policy instruments shall only be used to maintain price stability, and thus not to promote a safe and efficient payment system. 3 we sometimes say that monetary policy shall take financial risks into account, as it can be difficult to stabilise inflation around the target if households are forced to rapidly reduce their debts. 4 such difficulties could arise, of course, but for me it is not consideration of the inflation target that mainly justifies letting monetary policy take financial risks into account. instead i perceive taking financial risks into account to follow on from the task of “ supporting the objectives of general economic policy with the aim of