Public Hearing with Mario DRAGHI, Chairman of the European Systemic Risk Board:
- extracts from the statement by Mario DRAGHI
EP Committee on Economic and Monetary Affairs
Lieu: European Parliament, Brussels
End production: 18/02/2013 First transmission: 18/02/2013
Mario DRAGHI, President of the European Central Bank and also chair of the European Stability Risk Board (ESRB), visited today the European Parliament to meet with the members of the ECON-Committee. There, he addressed the members under these two clearly distinguished roles, as President of the ECB and within the framework of the Monetary Dialogue, DRAGHI presented to the ECON-Members the perspective of the ECB on Economic and Monetary Developments and entered in a discussion in a discussion with MEPs covering issues such as the establishment of a Single Resolution Mechanism for Problem Banks in Europe and implications of the current low interest environment.
Only the original language version is authentic and it prevails in the event of its differing from the translated versions.
||Exterior shot of the EP, Brussels
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board: "Bank funding markets are also showing signs of improvement, as indicated by, among other things, the investors’ rising appetite for euro area bank debt. However, a weak macroeconomic outlook in some EU member countries could affect banks’ profitability and capital levels. Banks may delay necessary deleveraging and cleaning-up of their balance-sheets, exacerbating fragile macro-financial linkages and making more difficult to raise equity and provide credit to the real economy."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board: "In addition to the risks noted earlier, EU banks have high refinancing needs over the coming years and continue to be dependent on central bank funding. Addressing these challenges in a decisive and sustainable manner is a prerequisite for ensuring a more resilient financial system that is capable of supplying the financial services to support economic activity."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board: "The fragility of the “funding structure” of many of our credit institutions: the crisis showed that they were overly reliant on volatile and short-term funds, and excessively engaged in maturity transformation. For this reason, the ESRB recommends that credit institutions submit their individual funding plans to their national supervisors, as is already the case in a few EU Member States, and that the EBA co-ordinates assessment of those plans at Union level."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board: "We are also publishing recommendations on money market funds (MMFs) today. MMFs are a key component of the shadow banking sector. In Europe, such funds manage around €1 trillion in assets, concentrated on a few countries (mainly France, Ireland and Luxembourg). Following the financial crisis, there was international agreement on the need for structural reforms in this sector. The risk addressed by the ESRB is that a potentially destabilising run by investors on MMFs could lead to spillover effects for the wider financial system. The risk of an investor run may be higher for MMFs with a constant net asset value (so-called CNAV funds). The ESRB thus recommends that it be mandatory for CNAV funds to be transformed into funds with a variable net asset value (VNAV funds) over a sufficiently long transition period."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board: "The next step in developing the macro-prudential framework is to provide these national authorities with a flexible toolkit of macro-prudential instruments to ensure that, once in place, they are able to prevent the local build-up of systemic risks. The ESRB has made important headway, at a technical level, in identifying both the primary and the intermediate objectives of macro-prudential policy, as well as an indicative list of instruments that should be available in order to attain all the goals. I am confident that I shall be able to report on this in greater detail at one of the forthcoming hearings."
||Cutaways (5 shots)