academics. let me mention two but also say upfront that i am not particularly convinced by any of them. one option that has been mooted is to allow nominal interest rates to go deeper into negative territory. yet there is an effective limit to lowering rates since ultimately this conflicts with the ability of citizens to hold cash. therefore some scholars have called for the imposition of electronic money and the abolition of cash. as i have discussed at length elsewhere, i see serious problems with such an approach. 8 it risks gambling with central banks ’ credibility at a time when credibility is paramount. and perhaps even more importantly, it denies the crucial social function of cash. another option proposed by some observers is for central banks to raise their inflation objectives and therefore to lift equilibrium nominal rates. leaving aside the debate about the costs of higher inflation, i am not sure that this idea is entirely convincing. the reason is that the mechanism through which it works is the signalling channel – people expect higher inflation, so inflation rises. but at a time when inflation is low everywhere, and when central banks are running very accommodative monetary policies just to achieve that, one can question whether such signals would really be credible. i see a risk, in fact, that changing our strategy to rely on fuzzy concepts and unobservables would only end up damaging our credibility. so what we need today, in my view, is to shift the debate away from its narrow focus on monetary policy. rather than concocting more and more innovative solutions for central banks to get around the lower bound, we should focus instead on what other policy areas can contribute. in a world of very low interest rates, monetary policy cannot be the only game in town – and we should not pretend it can be. in particular, we urgently need to press ahead with structural reforms to improve long - run economic growth, which will consequently lift equilibrium interest rates. in my view it is much better to provide monetary policy with greater room with a process that increases output and wealth than by ones that increase social costs. at the same time, fiscal policy needs to become more effective at complementing monetary policy in managing cyclical fluctuations. in the current euro area context that means those countries with fiscal space should use it better, and going forward fiscal rules should be more rigorously enforced so that countries enter downturns with greater ability to carry out active stabilisation and invest into education and innovation, to name but a few. for individual jurisdictions the exact

christine lagarde : the european systemic risk board's first general warning one year on welcome remarks by ms christine lagarde, president of the european central bank and chair of the european systemic risk board, at the 7th annual conference of the european systemic risk board " financial stability challenges ahead : emerging risks and regulation ", frankfurt am main, 16 november 2023. * * * it is my pleasure to welcome you to the seventh annual conference of the european systemic risk board ( esrb ). 1 societies throughout history have always found ways to alert people to the potential materialisation of risks so they have time to successfully pre - empt them. some methods were simpler than others. in the middle ages, for example, village bells were rung to raise the alarm. 2 but today, the complexity of our economy means that risks can appear from all angles, and the task of signalling them is often assigned to expert bodies. the esrb was set up precisely to identify the risks emanating from an interconnected financial system that national actors might not see. just over twelve months ago, the esrb published a " general warning " about financial stability risks, addressed to all european union and national supervisory authorities. 3 this was the first such warning in its 13 - year history – and a clear call to action. one year on, we can begin to take stock of that general warning, with two important questions coming to the fore. first, to what extent have the risks that we described materialised so far? and second, how impactful has the general warning been in increasing the financial system's resilience? the materialisation of risks we issued our general warning in september 2022 – a time of exceptionally high uncertainty. the russian invasion of ukraine had combined with other factors to increase the likelihood of tail risk scenarios materialising. 4 europe was facing the risk of drastic shortages of gas and oil as winter approached. and the sharp shift from a decade of very low rates to higher rates in a short space of time – necessary to fight rising inflation – also risked exposing financial imbalances and sparking substantial market volatility. at the time, we warned that all the risks we foresaw could materialise simultaneously and amplify each other's impact. fortunately, this scenario has so far not come to pass. but some specific risks we identified have since partially materialised. 1 / 4 bis - central bankers'speeches first, we expressed concern that households and companies would