received less attention so far – the effects of financial regulation on financial structures, in particular at times of fast technological change. allow me to explain these two observations in more detail. a holistic view on regulatory trade - offs over the past ten years, the financial market landscape has changed significantly, both in terms of how risk is being transformed and how it is being pooled and managed. on the intermediation side, the non - bank financial sector has substantially increased its share of the market, from 43 % in 2008 to 55 % in early 2017. on the risk management side, central clearing houses have emerged following the introduction of mandatory central clearing for standardised over - thecounter ( otc ) derivatives – as agreed by the g20 at its pittsburgh summit in 2009. these changes have also impacted the nature and scope of financial regulation. for example, the fsb has progressed towards tighter regulation of market - based finance, while cpmi - iosco and other international bodies have worked tirelessly since 2012 to establish a regulatory framework that makes central clearing counterparties ( ccps ) more resilient and easier to resolve. 3 1 / 6 bis central bankers'speeches a more diverse financial sector, however, also means that regulatory spillovers have become both more likely and more difficult to identify. let me take the example of ccps and their interactions with the basel iii leverage ratio. because clearing services require clients to post collateral, the non - recognition of such collateral in the leverage ratio framework may cause banks to scale back their clearing services, potentially leading to an unhealthy concentration of clearing services. in other words, there is a risk that the leverage ratio could potentially make our markets more, not less, risky. some have publicly concluded on this issue, asking the basel committee to consider how it could be amended. others are still reviewing these dynamics, including an fsb - led review of incentives to centrally clear, the derivatives assessment team ( dat ). so, different from regulation for one category of financial players, such as banks, where overlapping rules may be desirable for the reasons explained by andy and colleagues ( the “ tinbergen ” and “ brainard ” rules applied to financial regulation 4 ), regulatory spillovers across financial players may be more a source of concern. ideally, quantitative models would support policymakers in characterising and overcoming such trade - offs. this approach, however, faces two high hurdles. the first is that policymakers would need to specify better their loss

ecb has always emphasised the broad - based nature of its monetary analysis. in order to distil the policy - relevant “ signal ” about risks to price stability from the monetary data, the inevitable “ noise ” in shorter - term movements needs to be identified and removed. to do so, the ecb employs a variety of instruments, such as analysis of the components and counterparts of money, and other economic and financial data as necessary, as well as statistical and econometric models. the practical side of this signal extraction problem in the euro area can be illustrated by the experience between 2001 and 2003. financial and geopolitical uncertainty at that time triggered portfolio shifts into safe and liquid monetary assets. since these shifts reflected portfolio behaviour rather than an accumulation of transaction balances, the ensuing strong monetary expansion was assessed by the governing council not to pose risks to price stability under the prevailing economic conditions. on this basis, strong monetary growth of the m3 measure during that period was analysed as relatively benign in terms of inflationary risks, in line with the information extracted from the economic analysis. this example illustrates how the ecb has eschewed a mechanical interpretation of the development of m3. rather, the ecb has sought to explain monetary developments in a comprehensive manner, extract from these developments the policy - relevant signal about the medium to long - term outlook for inflation, and set interest rates in a manner that addresses the risks to price stability revealed by this analysis as well as by the complementary economic analysis. since mid - 2004, monetary growth in the euro area has been of a different nature to that observed between 2001 and 2003. in particular, the strengthening of m3 growth has been driven by the low level of interest rates rather than portfolio shifts into money. this has been reflected in the strong contribution that the most liquid components, such as currency and overnight deposits, have made to m3 growth. moreover, strong money growth has been primarily driven by a rapid expansion of loans to the private sector, underpinned by the economic recovery. taking the appropriate medium - to longerterm perspective, the continued expansion of money and credit through the course of 2005 gave an intensifying indication of increasing risks to price stability, fully in line with the results of our economic analysis, and vindicating our orientation to progressively increase interest rates by 150 basis points from december 2005 onwards. i thank you for your attention.