of asset - backed securities and cdos and to the proliferation of vehicles such as abcp conduits and sivs. in this respect, the failings of lighttouch regulation and the short - sighted focus on the banking system appear overwhelmingly clear. on the one hand, the tail risks hidden in the payoff profiles of highly rated securitisations were not understood by financial supervisors. on the other hand, the migration of risks outside the traditional banking sector into a thinly capitalised shadow banking system lacked appropriate oversight. this process resulted in a weakening of the prudential rules, a sharp deterioration in bank capital, an overall decline in lending standards, an unsustainable growth of leverage, a persistent under - appreciation of risks and, ultimately, in an unprecedented degree of fragility and interdependence in the financial system. looking ahead, supervision will have to move towards taking a proactive and forward - looking approach. likewise, the regulatory net needs to be cast wide enough to encompass all financial institutions and activities capable of generating systemic effects. finally, an assessment must be made of how the supervisory authorities applied the tools available to them and whether their decisions were taken on the basis of an independent judgement or were somehow influenced by external factors. historical experience offers ample evidence that inadequate arrangements as regards the independence of the supervisory authorities contributed to the emergence of financial instability. the east asian crisis of 1997 – 1998 is a frequently quoted example of weak regulations and forbearance, resulting from political interference in supervisory activity and leading to a financial crisis. institutional arrangements should ensure that supervisors are independent from the political authorities and not at risk of regulatory capture by the supervised institutions. in some cases the desire to enhance the competitiveness of domestic financial institutions may have influenced decisions that allowed such institutions to behave in a less prudent manner. these are important issues, and should be part of the international debate on how to enforce effective supervision so as to strengthen the capacity to mitigate future financial crises. 3. compensation of top executives let me now turn to the topic of executive compensation. remuneration of top executives has recently attracted special attention, notably in the financial sector, where the distribution of sizeable severance payments, entirely disconnected from the institutions ’ performance, has caused a public outcry. moreover, the financial crisis has revealed that inappropriately designed compensation mechanisms could lead to excessive risk - taking and should therefore be subject to policy intervention. the principles for sound compensation practices elaborated by

christine lagarde : ecb press conference - introductory statement introductory statement by ms christine lagarde, president of the european central bank, and mr luis de guindos, vice - president of the european central bank, frankfurt am main, 22 july 2021. * * * good afternoon, the vice - president and i welcome you to our press conference. at today ’ s meeting, the governing council focused on two main topics : first, the implications of our strategy review for our forward guidance on the key ecb interest rates ; and, second, our assessment of the economy and our pandemic measures. in our recent strategy review, we agreed a symmetric inflation target of two per cent over the medium term. our policy rates have been close to their lower bound for some time and the medium - term outlook for inflation is still well below our target. in these conditions, the governing council today revised its forward guidance on interest rates. we did so to underline our commitment to maintain a persistently accommodative monetary policy stance to meet our inflation target. in support of our symmetric two per cent inflation target and in line with our monetary policy strategy, the governing council expects the key ecb interest rates to remain at their present or lower levels until we see inflation reaching two per cent well ahead of the end of our projection horizon and durably for the rest of the projection horizon, and we judge that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term. this may also imply a transitory period in which inflation is moderately above target. let me turn to the assessment of the economic outlook and our pandemic measures. the recovery in the euro area economy is on track. more and more people are getting vaccinated, and lockdown restrictions have been eased in most euro area countries. but the pandemic continues to cast a shadow, especially as the delta variant constitutes a growing source of uncertainty. inflation has picked up, although this increase is expected to be mostly temporary. the outlook for inflation over the medium term remains subdued. we need to preserve favourable financing conditions for all sectors of the economy over the pandemic period. this is essential for the current rebound to turn into a lasting expansion and to offset the negative impact of the pandemic on inflation. therefore, having confirmed our june assessment of financing conditions and the inflation outlook, we continue to expect purchases under the pandemic emergency purchase