monitored framework for risk appetite and highly assertive risk management. search for yield has intensified competition in the market for leveraged finance. the result is that the terms for borrowers have become more favourable – ultimately, that increases the risks for the lender. we as supervisors take a close look at the credit quality of borrowers as measured by their level of leverage. lending to highly leveraged counterparts may entail significant risks. and in the euro area, we observe that the leverage of corporate borrowers has increased. in 2014, 35 % of transactions arranged by significant institutions actually refinanced borrowers at an increased level of leverage. moreover, we as supervisors are not always impressed by the quality of loan contracts. some loans contain only limited obligations for borrowers, for instance with regard to payment terms. particularly when refinancing or renewing commitments, banks might be inclined to accept the removal of covenants in order to preserve existing commercial relationships. we as supervisors also care about returns. banks are taking on risks ; but do they gain adequate returns? well, over the entire credit cycle, they may not necessarily earn more returns because there are other factors at play. today, fierce competition is one of the factors that depress returns despite the increase in risks ; it might prompt some banks to reduce fees in order to increase their market share. and tomorrow, the credit cycle might reverse and bis central bankers ’ speeches default rates surge. such a scenario ultimately raises the issue of default - recognition methodologies. and last but not least, there is also the reputational perspective. by acting as underwriters in leveraged - finance deals, banks also distribute a certain amount of exposure. in 2014, around €50 billion of leveraged - loan exposures were distributed. nevertheless, from a reputational perspective and to avoid potential mis - selling practices, the quality of the distributed assets is of the essence. and currently, 21 % of exposures retained by banks are covenant - lite, against 74 % of those that they distribute. to sum up : banks appear to be increasing their exposure to the growing market for leveraged finance. the leverage levels of borrowers are increasing, while constraints on loan contracts are being removed. as i said earlier on, there is no such thing as a free lunch, and ultimately, it is the task of risk managers to ensure that the price is adequate – risk and return have to remain in balance. among other things, this requires forward - looking risk

european central bank : press conference - introductory statement introductory statement by mr willem f duisenberg, president of the european central bank, and mr christian noyer, vice - president of the european central bank, at the press conference, held in paris, on 19 october 2000. * * * today, the governing council met for the second time outside frankfurt. therefore, let me first of all thank our host, governor trichet, for inviting us to meet in paris and for the generous hospitality offered to us. our meeting was also attended by the president of the eu council, mr fabius, and european commissioner solbes. as usual, we conducted our regular examination of recent monetary, financial and economic developments and their implications for a monetary policy aiming to maintain price stability in the medium term. following this review, the governing council decided to leave the ecb interest rates unchanged. moreover, we exchanged views on achievements so far and the challenges ahead. let me briefly report on developments since the last meeting of the governing council before turning to our more general assessment. as regards the first pillar of our monetary policy strategy, no new data on monetary developments have become available since 5 october. turning to the second pillar, oil prices and exchange rates remained two important factors under examination. before coming down somewhat, oil prices had surged again as markets were concerned about the impact of political tensions in the middle east. meanwhile, real gdp growth over the four quarters up to mid - 2000 has proved to have been very strong. as mentioned at our last meeting, some uncertainty about short - term growth dynamics stems from oil price developments, as is reflected in survey or confidence data. while these indicators have weakened somewhat in recent months, overall they remain at high levels and underlying forces for continued robust growth remain favourable. this is also reflected in little changed bond market developments. as foreseen at the time of the governing council meeting two weeks ago, energy price developments have had a strong impact on inflation rates ; in september the hicp rate of inflation rose further to 2. 8 %, compared with 2. 3 % in august and 2. 4 % in july. this development did not come as a surprise and was already taken into account in our considerations on monetary policy action on 5 october. overall, latest developments underpin the message we stressed on 5 october, namely that monetary policy continuously needs to ensure that expectations remain firmly anchored in the maintenance of price stability, despite current inflation rates. in addition to commenting on more recent developments,