… yes. in order to encourage people to innovate they need to be able to enjoy the fruits of their innovation. but if rents are excessive, a minority appropriates the benefits of globalisation and technological progress. finance is necessary to fund innovation, but it may itself become an excessive source of rent - seeking. how? large financial institutions naturally tend to grow in size in order to exploit economies of scale, diversify, and reduce their financing costs. if they are too large, that creates a problem of competition and this creates rents. it also encourages a phenomenon specific to finance : being “ too big to fail ”. a large financial institution may take unreasonable risks because it knows that the public authorities will have no choice but to rescue it if something goes wrong … that race for size must be avoided by way of regulation. another phenomenon specific to finance is rents being built up by individuals. a proportion of financial industry employees are remunerated at unreasonable levels when measured against their value to society, as thomas philippon and ariell reshef have clearly shown. this misappropriation is socially unjust and must be regulated. hence the eu legislation aimed at regulating the distribution of bonuses. some countries, such as the united kingdom, have gone further in making senior bank managers criminally liable in the event of excessive risk - taking or lack of control. it is a political choice. france also could do it. all these rules reduce the risk of financial crises, which tend to deepen inequality. too often in the past, taxpayers have borne the cost of bank recapitalisation post - crisis. and banking crises, by causing economic activity and employment to fall, hit the most vulnerable in our societies the hardest. europe is endeavouring, with a set of new rules, to avoid the costs of these crises being borne by taxpayers, by calling on bank shareholders and creditors. what is europe doing otherwise to combat inequality? to reduce inequality, redistribution instruments are needed, i. e. taxes and transfers. only a legitimate, elected parliament can decide to tax some people to give to others. at global level, such a legislature obviously does not exist. at european level, it does. this is an extraordinary 2 / 3 bis central bankers'speeches opportunity! it should be used effectively. the paradox of globalisation is that the greater the need for redistribution instruments, the more they are called into question. for example, it is becoming increasingly difficult to tax large companies, which are now operating on

vitor constancio : presentation of the european central bank annual report 2015 to the committee on economic and monetary affairs of the european parliament introductory remarks by mr vitor constancio, vice - president of the european central bank, to the committee on economic and monetary affairs of the european parliament, brussels, 7 april 2016. * * * mr chairman, honourable members of the committee on economic and monetary affairs, ladies and gentlemen, i am honoured to once again present the ecb ’ s 2015 annual report to your committee. please allow me to take this opportunity to express my heartfelt thoughts, and those of the ecb ’ s executive board and ecb staff, for the victims of the recent attacks in brussels, in the heart of europe. our thoughts are also with their families and friends. events like this remind us that europe must stand together. and our institutions have a role to play in this respect. the presentation of our annual report to those representing the european union ’ s citizens is a key element of our accountability, which is a necessary counterpart to our independence. that is also why we have decided to publish our feedback to the input you provided in the resolution on the 2014 annual report, together with this report. this is the first time we have done so. this decision reflects the importance of having a fruitful dialogue between our institutions, for the benefit of european citizens. today, i will first discuss the monetary policy measures that the ecb has taken to fulfil its mandate and what impact these have had on the real economy. i will then explain how steps to complete banking union and a capital markets union would not only support a strengthened emu ( along with fiscal and economic union, as well as democratic accountability ) but also contribute to enhancing financial stability. as european developments need to be put into a wider perspective, i will also say a few words on ongoing discussions in international fora regarding global developments and international financial regulation. monetary policy and its impact on the real economy 2015 was characterised by a modest economic recovery. however, inflation dynamics were weak and continued to deteriorate throughout the course of the year. thus, after adopting our credit easing measures in the middle of 2014, we took further decisive action in 2015 to pursue our price stability mandate. let me remind you that, in january last year, inflation in the euro area had moved into negative territory, the outlook on inflation had worsened significantly and market - based inflation expectations stood at historic lows. in this situation, we