Public Hearing with Mario DRAGHI, Chairman of the European Systemic Risk Board :
EP Committee on Economic and Monetary Affairs
EPRef94510 // European Parliament , Brussels, room JAN 4Q2 - 17.00-18.00 //
Lieu: European Parliament, Brussels
End production: 23/09/2013 First transmission: 23/09/2013
Mario Draghi debated with members of the Economic Committee in his double capacity as ECB president and chairman of the European Systemic Risk Board (ESRB), the organisation created to help prevent a new financial crisis. During the debate with the ECB President, MEP's underlined the need to review the implications of the recent monetary policy decisions and the consequences of the austerity policy on the growing unemployment rate.
For the very first time, the revised Stability and Growth Pact rules (the two-pack) will apply this autumn to member states' draft budgets for 2014. Member states have until the end of this month to submit the first version of their draft budgets for 2014 to the European Commission for scrutiny. Under the revised SGP rules, they must then formally notify the Commission of their draft finance law by 15 October.
Only the original language version is authentic and it prevails in the event of its differing from the translated versions.
||Exterior view of the European Parliament, Brussels
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board, "There is a need to deal with possible risks and vulnerabilities that stand from insurance, some of which have the potential to affect the stability of the financial system."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board, "If business models are not modified insurance companies could search for higher yields by investing in riskier assets. But this would expose them to potential losses through increases in risks Premium."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board," Spill over to the wider financial system through direct linkages and common exposures can not be ruled out."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board," The Banking system plays a crucial role in the financing of the economy, at the same time its role in the unfolding of the financial crisis has highlighted a number of vulnerabilities. Important steps are being taken to address these vulnerabilities and to deliver the healthier banking system the European citizens deserve."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board, "We are looking at 2 structural features of the European banking system thgat the financial crisis has highlighted. first the large size of the banking system relative to the real economy and second the concentration of losses in certain lending segments."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board," The procyclicality of CCP's margin rules and practices is a key concern. increasing margin requirements in times of stress and decreasing them in good times may make sense in the perspective of an individual CCP, but also carries the risk of increasing the cyclical sensitivity of the financial system."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board," Evolving CCP markets need to be designed in such a manner it limits the spill overs of potential distress at one CCP to another. To this end specific guidelines have been already issued by ESMA. nevertheless given the importance of CCPs it is important that there is a broad set of tools to increase their resilience to contagion.
||SOUNDBITE (English) Sharon Bowles (ALDE, UK) , Chairwoman of the ECON Committee, "In the systemic context, are insurance companies becoming more systemic because they are right now threatened with bail in and a bank resolution recovery?
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board,"For insurance being systemic is linked to the possibility that a certain economic function like risk diversification would disappear , for example no re-insurance anymore. More over vulnerabilities in the insurance sectior would translate themselves into a lack of long term investment in the economy or in the worst case in procyclical fire sales.
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board, "Even without guaranties I should say that there has been a tendency of large insurers to enter into more medium and short term lending originated loans."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board," The establishment of the recovery, the continuation of fiscal consolidation will both increase confidence reduce the risk premium, reduce the interest on governments bonds and therefore improve the funding and the lending into the real economy."
||SOUNDBITE (English) Mario DRAGHI, Chairman of the European Systemic Risk Board, "How will the SRB and the SSM coexist? Our view is that they can operate in a continuous but different institutional area. The SRB is a network , the SSM will be a fully fleshed institution , the SRB has only soft powers, the SSM will take biding decisions. The SRB collects all Central banks and supervisory authorities, the SSM only the Euro area. the SMM will exercise some of the powers that today are in the hands of the SRB members. Crucial powers in the area of banking supervision and shared competencies with national macro prudential authorities in the area of banking."
||Cutaways (4 shots)