klaas knot : introductory remarks - ecb fifth macroprudential policy and research conference introductory remarks by mr klaas knot, president of the netherlands bank, at the european central bank fifth macroprudential policy and research conference, jointly organised with the international monetary fund, frankfurt am main, 17 october 2023. * * * many thanks for the kind introduction, tobias. it is a pleasure to be here. i have little time to cover a fascinating and complex topic, so let me focus on just a few high level issues regarding the effective use and the challenges of macro - prudential policy. we tend to forget that macro - prudential policy is still a relatively new field of work that originated from the great financial crisis. at that point in time, we first needed to design tools to fix the faultiness in the system. the focus then shifted from design to implementation. the challenges of macro - prudential policy are therefore evolving. and now we are at a stage where the onus lies on actually using the tools and to evaluate their effectiveness and efficiency. including in the face of new risks. so what i intend to do in my opening remarks is to first discuss some of the challenges in implementing the existing macro - prudential toolbox, where i will mainly draw on our experiences within the eurosystem. i will then move on to the new frontiers of macroprudential policy development, which are arguably global in nature and where the fsb, jointly with the imf, has a leading role to play. challenges on the challenge of using macro - prudential tools, there is still room for improvement. for instance, euro area jurisdictions differ in how they apply macro - prudential tools in practice. in europe, we have a harmonised framework for identifying d - sibs. there is however no further guidance on buffer calibration. as a result, two banks with similar scores for indicators of systemic importance such as size - to - gdp, interconnectedness, and lack of substitutability, can end up facing quite different requirements. most big banks in the euro area fall in a range of d - sib allocations of roughly 1 - 2. 5 % of risk weighted assets, but some allocations bear no apparent relationship to the scores that were assigned. i think it is important to further investigate such heterogeneity and what mechanisms could be put in place to correct for this in order to ensure

on the external side, the continued strength of global demand should support euro area exports. on the domestic side, investment should further benefit from continued very favourable financing conditions, robust corporate earnings and gains in corporate efficiency. consumption growth should gradually rise, broadly in line with expected developments in disposable income. risks to this outlook for economic growth continue to lie on the downside and relate to high and volatile oil prices, concerns about global imbalances and the level of consumer confidence in the euro area, although the latter is improving. turning to price developments, annual hicp inflation was 2. 2 % in december, according to eurostat ’ s flash estimate, compared with 2. 3 % in november and 2. 5 % in october. this decline was the result of some relaxation of earlier tensions in oil and petrol markets. nevertheless, annual hicp inflation rates are expected to remain at elevated levels over the short term, mainly on account of the most recent increases in oil prices and some adverse base effects. beyond the short term, indirect effects of past oil price rises on other components of the price index may gradually materialise, and already announced changes to administered prices and indirect taxes can be expected to have an upward impact. meanwhile, wage increases have remained moderate over recent quarters. all in all, the information available remains consistent with the scenario for price developments as reflected in the december staff projections. risks to this scenario remain on the upside and include further rises in oil prices, additional increases in administered prices and indirect taxes, as well as – more fundamentally – potential second - round effects in wage and price - setting behaviour. it is therefore crucial that the social partners continue to meet their responsibilities also in the context of a more favourable economic environment. turning to the monetary analysis, the annual growth rate of m3 moderated somewhat in november, but remained very robust, mainly owing to the stimulative impact of the prevailing low level of interest rates. the strong growth of m3 continues to be driven by significant contributions from its most liquid components. the growth of loans to the private sector – and, in particular, mortgage borrowing – has strengthened further over recent months, from already rapid rates of growth. against this background, price dynamics in the housing markets need to be monitored closely. liquidity in the euro area remains ample by all plausible measures. strong monetary and credit growth in a context of already ample liquidity in the euro area points to upside risks to price stability over medium to longer horizons. to sum up