jean - claude trichet : preserving financial stability in an increasingly globalised world keynote speech by mr jean - claude trichet, governor of the banque de france, at the european financial markets convention ( efmc 2001 ), paris, 15 june 2001. * * * ladies and gentlemen, it is a great pleasure for me to participate in this european financial markets convention. the impressively dense program of the convention illustrates that the integration of financial markets in europe is a major and multi - dimensional challenge. the banque de france and the eurosystem have a strong interest in all these issues. in particular, a safe and efficient functioning of the clearing and settlement systems of the euro area is crucial for the stability and efficiency of the financial system and for the good implementation of monetary policy. the consolidation of the market infrastructure, currently underway, will contribute to reaching these objectives through the fostering of market liquidity and the reduction of transaction costs. there is however no single path for such a consolidation : it will be up to the market to select the way which best fits its needs, while it will be up to regulators and to the eurosystem to make sure that the resulting infrastructure is adequately safe, efficient and reliable. i would like now to share with you some views from the broader perspective of financial globalisation. as you know, the globalisation of the world economy and the development of financial markets were driven by two key factors : · firstly, financial deregulation - reinforced in europe by the setting up of the single market and subsequently of the economic and monetary union - which liberalised capital flows and enhanced competition among financial sectors ; · and secondly, technical and financial innovation, which simultaneously paved the way for the creation of financial markets that are deep, liquid and interconnected. what is interesting to stress regarding financial globalisation is that the interaction of free capital movements within interconnected markets, increasing integration of market segments and hedging opportunities provided by new financial instruments have allowed a better fit between the financing capacities and borrowing requirements of governments, households and companies. the use of market interest rates, which represent the markets ’ consensus on the risk incurred at a moment, as a driving force is fully beneficial to an efficient allocation of capital. lowering the barriers to entering the financial sector, the free circulation of information and fiercer competition have also brought financial markets closer to a situation of pure and perfect competition, which is beneficial to all consumers. last but not least, the growth of market financing has allowed

to the favourable fact that the slope of the yield curve has remained positive. 3 / our forward guidance provides further indications as to the future path of our monetary policy ; and by steering expectations, it has an impact on the yield curve. our forward guidance is clear as to the sequencing : “ we expect [ the key ecb interest rates ] to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases. ” there is no doubt within the governing council about this sequencing. in all events, we should not consider raising interest rates until we have reached a sustained adjustment in the path of inflation. 4 / the fourth instrument is the provision of liquidity to financial institutions. in october 2008, we introduced the fixed - rate full allotment policy in all our regular refinancing operations. it was designed in order to guarantee banks ’ access to liquidity – and this policy is still active today, for both 1 - week or 3 - month operations. the maturity of this liquidity provision was then extended with the launch of 3 - year long - term refinancing operations ( ltros ) and, later, targeted longerterm refinancing operations ( tltros ). the latest series of tltros provided banks with up to 4year funding at attractive rates – as low as – 0. 4 % – in order to further ease financing conditions. in september 2017, a total of eur 760 billion is still lent to euro area banks through tltros, which is substantial, over 7 % of euro area gdp. before i conclude, let me add a few words on the recent evolution of the euro. a number of factors play a role ; monetary policy is only one of them. the sharp appreciation of the euro has notably been stemming from the significant reappraisal of growth prospects for the euro area, as well as from the geopolitical context. the impact of the strong euro on growth is currently offset by the strength of domestic demand in the euro area ; but the recent appreciation of the euro exchange rate has led us to revise down slightly the outlook for inflation. let me recall that the exchange rate of the euro is not a policy target of the ecb. but the exchange rate remains an element that we closely monitor owing to its possible implications for the medium - term outlook for inflation. i would like to finish by insisting on one word : confidence, but confidence without complacency.