strike a balance. full disclosure is neither possible nor desirable. sensitive information must remain confidential, as it could endanger financial stability if revealed. the third pillar is to ensure the legality of supervisory action. there are two elements to this. the first is that there are concerns that tensions could arise from having monetary policy and supervision under one roof. in my view, the clear delineation of mandates in the legal framework and the functional separation of the policy areas mitigate such risks, and i pledge to ensure that the separation principle is fully respected. it ’ s worth 1 / 2 bis central bankers'speeches remembering that a system - wide perspective is the key advantage of european banking supervision, as it allows us to identify and react to euro area - wide linkages and spillovers. applying national laws, on the other hand, can lead to a fragmented implementation of supervisory rules. the second element is that we have to act within the boundaries of our mandate and respect the law at all times. any supervisory action must remain bank - specific and be taken within the limits of relevant european legislation, which is defined by the co - legislators, i. e. the european parliament and the council, with further specifications from the european banking authority. i look forward to answering your questions. 2 / 2 bis central bankers'speeches

the financial system ’ s ability to absorb negative shocks, and so when a shock arrives, losses mount, the financial system weakens, lending slows, and economic activity slows by more than it would have otherwise, potentially leading to an economic downturn or a more severe recession. should financial vulnerabilities affect the stance of monetary policy? these observations lead to the important question of whether and how financial vulnerabilities should affect the setting of monetary policy. one simple framework for evaluating the tradeoffs associated with actively setting monetary policy to lean against the buildup of financial vulnerabilities is to examine the costs and benefits of such a policy in terms of unemployment and inflation. in this approach, the costs of tightening monetary policy in response to a buildup of financial vulnerabilities are lower employment and potentially below target inflation in the near term. the benefits are possibly reducing the risk of a future financial crisis, an event likely associated with a much larger fall in employment and inflation. one view is that monetary policy curbs household and business borrowing only modestly but can boost the unemployment rate notably. and so using monetary policy to damp borrowing does more harm than good. according to this view, using monetary policy to lean against financial vulnerabilities does not generate significant net benefits and may be counterproductive — increasing unemployment and decreasing inflation below a desired level with little reduction in risks to financial stability. 4 at the same time, some research has identified circumstances under which the benefits of using monetary policy to lean against financial vulnerabilities could outweigh the costs. 5 a key consideration is the estimated amount of economic activity lost in a financial crisis — and some research suggests such losses may be quite large, which raises the benefits of leaning against imbalances. similarly, monetary policy may affect a broad range of financial imbalances — excessively high house or equity prices and leverage within the financial sector — and the full set of these effects could shift the risk of financial instability sufficiently, at least under some circumstances, to make leaning against financial vulnerabilities with monetary policy desirable. the broader point is that we do not fully understand the cost – benefit tradeoff and whether monetary policy adjustments for financial stability reasons may be appropriate at some times. whither macroprudential policy? of course, there is one additional and critical factor to consider when weighing adjustments to the stance of monetary policy for financial stability reasons : the availability and efficacy of other instruments to promote financial stability