page 1 sur 8 asociacion de mercados financieros annual financial convention madrid, 21 november 2016 francois villeroy de galhau, governor of the banque de france europe facing a new political economy mr. president, ladies and gentlemen, thank you for your invitation. i am grateful for the opportunity to speak here in madrid today with my friend governor l. linde, in the midst of the spanish financial community, and in a country which has demonstrated its active commitment to the european project since it joined the european union thirty years ago. we have come a long way in europe and our common history and past success will help us look ahead in these challenging times. the brexit referendum in june and mr. trump ’ s victory two weeks ago have indeed come as shocks for europe : both have increased uncertainty and are raising questions about the european identity. how should we, as europeans, react? not by less europe : this would clearly be a mistake if we want to collectively master our own destiny in this new world. but by a better europe, a more focused and efficient one. in concrete terms, we need to adapt in two ways : first, by building actively on our economic and social assets – among them our single currency and monetary policy ; second, by coming together around a few new select priorities – including tackling the current “ investment crunch ”. * * page 2 sur 8 i. first, europe ’ s assets in the new “ political economy ”. let me start with a brief remark about terminology. for a long time, economic thinkers used the term “ political economy ” to refer to the discipline that we now call “ economics ”. adam smith, david ricardo or leon walras, to name but a few, were some of its exponents. despite its 400 year - old history, the term “ political economy ” had in the last decades gradually lost its importance as a comprehensive way of understanding economic issues. and yet it could now be returning to the forefront, given the strong interactions between politics and economics. at the international level, we cannot yet predict what mr. trump ’ s presidency will really be like, but we can expect a deep political shift, with consequences for american economic policies. besides, the electoral cycle will continue in europe, starting with the italian referendum in december. to state the obvious, the first certainty is that we are facing a lot of uncertainty. how will europe overcome this? i sincerely hope not by “ waiting and

conduct regular prudential stress tests to measure the impact of interest rate changes on their interest margins and the economic value of their capital ; us regional banks such as svb are not subject to this requirement. as regards the regulations of insurers, the general approach adopted in june 2022 by the european council on amendments to the solvency ii directive is in line with several of the acpr's objectives : overall neutrality of quantitative requirements on the french market, support for long - term investment with more stringent requirements in terms of sustainable finance, better rules for crossborder transactions and better application of the principle of proportionality. it is now very important that the european parliament adopt this directive as soon as possible, so that it can be implemented quickly and without being diluted. iii. areas to be enhanced in the short and medium term resolution is another cornerstone of the banking union. however, the fact that the swiss authorities opted for a merger in the case of credit suisse raised new questions about how to make resolution more operational and reliable. let me share just two thoughts at this point. the first concerns the resolution of large or even systemically important banks. the provision of potentially significant amounts of liquidity in times of crisis is a prerequisite for successful resolution. the framework for the ecb to provide " eurosystem resolution liquidity " has yet to be built. the other priority, at the other end of the spectrum, is to shift from resolution " for a minority " - a far too page 7 of 9 small minority of cases : two in the last nine years - to resolution " for the majority " of cases, including small and medium - sized banks. the european commission's proposal for a revised crisis management and deposit insurance framework is a step in the right direction. yet, greater pooling between the resolution fund and deposit guarantee schemes is debatable, as is the fact that large companies would potentially benefit from the same protection as the smaller deposits of individuals or small and medium - sized enterprises. five more " thematic " risks also call for more stringent measures, some of which are already in place. with regard to customer protection and the sound supervision of business practices, jean - paul faugere and i had clearly requested greater transparency - and moderation - of unit - linked life insurance fees. fortunately, discussions with industry professionals have gathered pace in recent days to establish a system that better serves the interests of customers. our objective is to significantly bolster the