economy. we will face, in the short term, higher inflation and slower growth. but there is considerable uncertainty about how large these effects will be. it will crucially depend on how the conflict evolves, on the 3 / 4 bis central bankers'speeches impact of the sanctions and on possible further measures. beyond the humanitarian and economic impact, the recent events have also exposed major strategic vulnerabilities in europe. and we can only address these by remaining united. europe ’ s recent history has shown that when faced with significant shocks, we are capable of coming together, learning our lessons and emerging stronger. the initiatives taken on european level so far to address this crisis suggest that this time will be no different. the war in ukraine has reminded us yet again that peace in europe cannot be taken for granted. but it has also reminded us of the european union ’ s very raison d ’ etre – to preserve peace. because, in the words of jean monnet, “ it is better to fight around the negotiating table than on the battlefield ”. thank you for your attention, i now stand ready to take your questions. 1 see annual report 2021. 2 see feedback on the input provided by the european parliament as part of its resolution on the ecb annual report 2020. 3 see ecb ( 2022 ), “ financial integration and structure in the euro area ”, april. 4 see bongini, p., ferrando, a., rossi, e. and rossolini, m. ( 2021 ), “ sme access to market - based finance across eurozone countries ”, small business economics, vol. 56, pp. 1667 - 1697 ; and hsu, p., tian, x. and xu, y. ( 2014 ), “ financial development and innovation : cross - country evidence ”, journal of financial economics, vol. 112, no 1, pp. 116 - 135. 4 / 4 bis central bankers'speeches

somewhat, by partly compensating households for higher energy prices through both indirect tax reductions and transfers. looking forward, efforts should be made to increasingly target measures on vulnerable households to keep public finances in check, while at the same time setting the right incentives for reducing the use of fossil energy and dependence on russian energy. moreover, a successful implementation of the investment and reform plans under the next generation eu programme would accelerate the energy and green transitions, enhancing long - term growth and resilience. the impact of the war on the european financial sector let me now turn to the impact of the war on the financial sector. so far, the fallout from the war has not posed a direct threat to financial stability. financial markets have been highly volatile since the start of the invasion but continue to function in an orderly manner. overall, the immediate economic effects of the russian invasion have generally been manageable for the euro area banking sector, and the banking system has not experienced any liquidity shortages. at the same time market valuations of banks have declined, but this mainly reflected broader concerns about a weaker economic outlook in light of rising energy and commodity prices, and the associated lower prospects for bank profitability. the aggregate direct exposure of the euro area banking sector to russia is anyhow limited and concentrated, and concerned banks are taking steps to reduce it further. the non - bank financial sector ’ s direct exposure to russian assets is also limited. while increases in fund outflows may cause liquidity risks to surface and spill over to the banking sector, stress has been contained so far. funds with higher share of russian securities mitigated such risk also with the use of liquidity management tools, such as suspension of redemptions. moreover, financial institutions have largely already incurred the possible losses on dollar and euro - denominated russian external sovereign debt, owing to the drop in market value of these 2 / 4 bis central bankers'speeches assets. commodity markets have been the main transmission channel for stress up to now. elevated commodity prices increase financial stability concerns associated with high inflation and low growth. furthermore, the extreme volatility of prices has led to some stress in commodity derivatives markets, although there has been no major incident so far. financial institutions have limited net exposures on commodity derivatives and banks acting as clearing members are generally safeguarded by robust credit - risk management frameworks. bigger net exposures are held by energy producers and suppliers, commodity traders, as well as energy - dependent firms who use commodity derivatives