sure that the lively debate ahead of us on that very relevant topic is the best way to overcome the jetlag. karl popper once said that “ without a free exchange of ideas there can be not freedom of thought. to find out whether our ideas are sound, we need other people to try them out on. ” this is what this event is all about. so, to kick off our exchange of ideas, let me try out some thoughts on you as to how financial stability might best be achieved. 2. the roles of monetary and macroprudential policy in macroeconomic management if anybody or anything has actually emerged from the crisis a winner, it is probably the word “ macroprudential ”. microprudential policies such as banking regulation and supervision are still necessary in safeguarding the soundness of individual institutions. but as it turns out, they are not enough when it comes to safeguarding the financial system as a whole. for the bis central bankers ’ speeches management of systemic financial stability risks we need an additional toolkit – macroprudential policies. and it seems to me that this assessment is by now widely shared. the role of monetary policy in this context is, however, still being debated. while macroprudential policy frameworks are still under development, we need to take a stand on whether and how monetary policy should play a supporting role without undermining its pursuit of price stability. first, we have to acknowledge that in the world we live in, macroprudential policy can never be perfectly effective – for instance because safeguarding financial stability is complicated by having to achieve multiple targets all at the same time. while maintaining price stability translates into one single target variable, that is, the average inflation rate related to the price of a consumption basket, maintaining financial stability is more complex. risks to financial stability can emanate from different sources, such as price bubbles in specific asset markets, but also reckless risk - taking by a single but systemic player, and so on. while the level and volatility in individual prices of goods and services is usually not of much concern to central bankers as long as the impact on the price index is small, the level of and volatility in particular asset prices could lead to instability of the financial sector. this is why preserving financial stability is a multi - dimensional problem. additionally, financial and business cycles do interact and the monetary policy stance does affect risk - taking by the financial sector. indeed, some current research supports

non - financial private sectors in some countries. fourth, liquidity risk is increasing in the rapidly growing investment fund sector, with potential spillovers to the broader financial system. beyond systemic risks at the aggregate euro area level, we are also closely monitoring risks arising at the country and sectoral levels. targeted macroprudential policy measures are the appropriate policy instruments to address these country or sector - specific risks. as you know, responsibility for decisions on macroprudential measures in the euro area is shared between national authorities and the ecb. this means that we can top up the macroprudential measures taken by national authorities for those instruments that are envisaged in eu legislation. the ecb strengthened its role in macroprudential policy in 2016 and also took action to improve transparency – the governing council published its first macroprudential statement in december 2016. 3 besides the risks in some countries ’ real estate sectors, we noted that cyclical systemic risks in the euro area remained contained and, therefore, a broad - based increase in countercyclical capital buffers in the euro area was not warranted. this view was in line with the decisions of the national authorities, with whom we enjoyed excellent cooperation over the past year. transparency in the macroprudential policy domain was also enhanced by the launch of the new biannual ecb macroprudential bulletin in march 2016. our 2016 annual report also focuses on the actions necessary to overcome the legacy of the crisis in the banking sector. decisive action is needed at the sectoral, national and european levels. first, banks need to continue adjusting their business models to better cope with the low interest rate environment. as we show in a dedicated analysis contained in the report, the optimal strategy is likely to depend on each bank ’ s core characteristics. 4adjustments may include crossborder mergers and acquisitions where they allow efficiency gains. second, significant effort is needed to solve the problem of non - performing loans ( npls ). the extent and macroprudential nature of the problem calls for a comprehensive and coordinated response at eu level. while actions should be taken by stakeholders at the national level, these should be harmonised in a european blueprint for asset management companies ( amcs ), among the strategies to reduce the stock of npls on banks ’ balance sheets. the issue is also being addressed as a matter of priority from a microprudential perspective. 5 further enhancing the european financial framework turning now to