jean - claude trichet : press briefing on the ecb financial stability review june 2005 opening remarks by mr jean - claude trichet, president of the european central bank, at the press briefing on the ecb financial stability review - june 2005, frankfurt am main, 31 may 2005. * * * ladies and gentlemen, welcome to this press briefing on the publication of the ecb ’ s june 2005 financial stability review. let me start by saying that in publishing this financial stability review, the second of its kind, the european central bank ( ecb ) is enhancing the way in which it addresses its financial stability mandate by issuing a public report on a semi - annual basis. under article 105 ( 5 ), the treaty establishing the european union assigned to the eurosystem the task of contributing “ to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system ”. in this vein, the issuing of this review, which represents the common view of the governing council of the ecb, and is now published half - yearly in june and december, is to promote awareness in the financial industry and among the public at large of issues that are relevant for preserving and enhancing the stability of the euro area financial system. by providing an overview of sources of risk and vulnerability to financial stability, the review also seeks to help preventing financial tensions. many of the national central banks that make up the eurosystem are also addressing their own financial stability mandates by periodically issuing public reports on the functioning of, and sources of risk facing, their own financial systems. by providing a unique pan - euro area perspective on financial stability issues, the ecb review aims at complementing the analyses contained within these reports. as i have said on the occasion of the publication of the ecb ’ s first financial stability review last december, central banks have a strong and natural interest in the safeguarding of financial stability. this is in particular because financial institutions, notably banks, are issuers of by far the largest component of the money stock. it is equally because a stable financial system is needed for an effective transmission of monetary policy and for the smooth operation of payment systems. a robust financial system is therefore needed to ensure that the single monetary policy can deliver on the primary objective of maintaining price stability in the euro area. finally, but not least, the health of the financial system is inextricably intertwined with the performance of the economy and its resili

liability to the customer. let me now turn to the issue of technology and cost. before i speak my mind on the issue, let me make it very clear that rbi does not support the argument that cash transactions in this country will disappear rapidly or that all paper based transactions would turn electronic if the financial sector was to offer electronic transactions free of cost. in fact, we firmly believe that anything that is offered free of charge can never be scaled up and that it cannot become bis central bankers ’ speeches robust and efficient unless it offers commercial viability to those who offer the product / service. having said that, i also do not support the principle, ostensibly being followed by some of the institutions, to recover a large part of technology expenses from the customers. i was amused at the action of banks deciding to waive charges on “ inter - core ” transactions hitting headlines in the media. it should have never happened in the first place. in fact, such charges, rather than their removal, should have hogged the limelight. further, in an electronic banking scenario, ad valorem charge to customers is an issue which needs to be relooked. in fact, in a country like ours, part of the cost efficiencies achieved through technology must be passed on to the smaller customers. this calls for a rejig in the way in which banks approach technology. in a technology led financial sector, collaboration among all stakeholders, including competitors, could prove to be the big cost saver. with rapid strides in security standards and capabilities, such a collaboration and sharing of it infrastructure is feasible on a much larger scale than is happening today. it is always perceived by the industry that the handholding / intervening by rbi is necessary for the systems to be operational in an efficient manner. i am unable to understand why collaborative approach cannot be the guiding force for success in adoption of shared it infrastructure. reserve bank has contributed to the fostering of innovative methods to improve access to financial services through mobile and opened up and clarified the issue of business correspondent ( bc ) interoperability. leveraging technology for making financial inclusion possible and a success prior to the enablement of bc interoperability, the banks and technology providers had made a case that it was the lack of interoperability, that was a deterrent for financial inclusion and hence, much headway had not been achieved. according to the technology providers, investment in a non - interoperable technology would be a costly proposition and they did not see