REPORT on the Council recommendation on the appointment of a Member of the Executive Board of the European Central Bank

6.12.2019 - (C9‑0149/2019 – 2019/0817(NLE))

Committee on Economic and Monetary Affairs
Rapporteur: Irene Tinagli

Procedure : 2019/0817(NLE)
Document stages in plenary
Document selected :  


on the Council recommendation on the appointment of a Member of the Executive Board of the European Central Bank

(C9‑0149/2019 – 2019/0817(NLE))


The European Parliament,

 having regard to the Council’s recommendation of 10 October 2019 (12451/2019)[1],

 having regard to Article 283(2), second subparagraph, of the Treaty on the Functioning of the European Union, pursuant to which the European Council consulted Parliament (C9‑0149/2019),

 having regard to its resolution of 14 March 2019 on gender balance in EU economic and monetary affairs’ nominations[2],

 having regard to Rule 130 of its Rules of Procedure,

 having regard to the report of the Committee on Economic and Monetary Affairs (A9-0049/2019),

A. whereas, by letter of 16 October 2019, the European Council consulted Parliament on the appointment of Fabio Panetta as Member of the Executive Board of the European Central Bank for a term of office of eight years, with effect from 1 January 2020;

B. whereas Parliament’s Committee on Economic and Monetary Affairs then proceeded to evaluate the credentials of the candidate, in particular in view of the requirements laid down in Article 283(2) of the Treaty on the Functioning of the European Union and in the light of the need for full independence of the ECB pursuant to Article 130 of that Treaty; whereas in carrying out that evaluation, the committee received a curriculum vitae from the candidate as well as his replies to the written questionnaire that had been sent to him;

C. whereas the committee subsequently held a hearing with the candidate on 3 December 2019, at which he made an opening statement and then answered questions put by the members of the committee;

D. whereas the Governing Council of the European Central Bank comprises the members of the Executive Board of the European Central Bank and the nineteen governors of the national central banks of the Member States whose currency is the euro; whereas, to date, all of the latter are men;

E. whereas Parliament has repeatedly expressed its disaffection regarding the appointment procedure for members of the Executive Board of the European Central Bank and has called for improved procedures in this regard; whereas Parliament has requested that it receive, in good time, a gender-balanced short list of at least two names;

F. whereas on 17 September 2019, Parliament delivered a favourable opinion on the Council recommendation to appoint Christine Lagarde as the first female President of the European Central Bank;

G. whereas women continue to be underrepresented in the Governing Council of the European Central Bank; whereas Parliament deplores the fact that the Member States have not taken this request seriously and calls for the national and EU institutions to work actively towards achieving gender balance in the next nominations;

H. whereas all EU and national institutions and bodies should implement concrete measures to ensure gender balance;

1. Delivers a favourable  opinion on the Council recommendation to appoint Fabio Panetta as Member of the Executive Board of the European Central Bank;

2. Instructs its President to forward this decision to the European Council, the Council and the governments of the Member States.




Fabio Panetta


Banca d’Italia

Via Nazionale 91 — 00184, Roma, Italy





Born in Rome on 1 August 1959. Married, three children.






Ph.D. in Economics and Finance (London Business School).

M.Sc. in Monetary Economics (London School of Economics).

Degree with honours in Economics (LUISS University, Rome).


professional experience and main positions held










Previous positions:











Senior Deputy Governor of the Bank of Italy. He stands in for the Governor during the latter's absence or incapacity.

President of the Italian Insurance Supervisory Authority (IVASS). In this role, he is member of the General Board of the European Systemic Risk Board. 

He is the Governor's alternate on the Board of Directors of the Bank for International Settlements.

Alternate member for Italy of the Group of Seven Countries (G7) and of the Group of Twenty Countries (G20).

Member of the OECD Working Party 3. 

Member of the Board of Directors of the International Center for Monetary and Banking Studies (ICMB) in Geneva and of the Governing Council of the Einaudi Institute for Economics and Finance (EIEF).

He was awarded the honorary title of High Official of the Order of Merit of the Republic of Italy.


From 2004 to 2017 accompanying person and alternate member of the Governor of Banca d’Italia in the Governing Council of the European Central Bank (Governors Antonio Fazio, Mario Draghi, Ignazio Visco).

From 2014 to July 2019, member of the SSM Supervisory Board at the European Central Bank.

From 2012 to May 2019, member of the Governing Board and Deputy Governor of the Bank of Italy.

Member of the Board of Directors of the Bank for International Settlements (2013 and from 2015 to 2018).

From 2003 to June 2019, member of the Committee on the Global Financial System of the Bank for International Settlements.

From 2013, member of the Board of the Insurance Supervisory Authority (Ivass).


He joined the Research Department of the Bank of Italy in 1985. He was promoted Manager (2000), Principal Manager and Head of the Monetary and Financial Division (2004), Senior Manager and Head of the Economic Outlook and Monetary Policy Department (2007), and Managing Director for the Eurosystem and Financial Stability (2011).

Taught the course “Competition and Performance of the European Financial System for the Master’s degree in European Economics and International Finance at the University of Rome, Tor Vergata (2004-05).

Taught “Theory and Practice of the Financial Markets” Ph.D course at the Faculty of Economics, University of Rome, Tor Vergata (1995-96).

Research Assistant in Econometrics at LUISS University of Rome (1982-83).





















Editor in chief of the Financial Stability Report of the Bank of Italy.

Member of the Board of Directors of the International Journal of Central Banking.

Editor of the chapters on money, credit and finance in the Bank of Italy’s Annual Report and Economic Bulletin.

Chairman of the Working Group on Sovereign Risk and Bank Funding Conditions, reporting to the Committee on the Global Financial System (Bank of International Settlements).

Chairman of the Study Group on Financial Market Volatility, reporting to the Committee on the Global Financial System (Bank of International Settlements).

Chairman of the Working Group on Efficiency, Competition and Credit Flows in the context of the survey, promoted by the G10 Finance Ministers and central bank governors, on the consolidation process for the banking and finance sector.

Representative of the Bank of Italy at the OECD’s High Level Group of Monetary Experts (Paris).

Member of the Working Party on Equities Markets, established by the governors of the central banks of G10 countries.

He gave seminars on economics and finance topics at the following institutions: American Economic Association, Board of Governors of the Federal Reserve System, Federal Reserve Bank of Chicago, Bank for International Settlements, De Nederlandsche Bank, Federal Deposit Insurance Commission, Borsa di Milano, Associazione Bancaria Italiana, Italian Ministry of Economy and Finance, Consob, the European University Institute (Florence), London Business School, London School of Economics, Università Bocconi, Bank of Canada, Sapienza University, Tor Vergata University, Center for International Studies, Istituto per la Ricerca sociale, Center for Economic Policy Research (CEPR), Monte Titoli S.p.A., Università di Pavia,  Bank of England,  Associazione per gli Studi di Banca e Borsa, LUISS University, Università Cattolica di Milano, Università di Ancona,  Università di Sassari,  Università di Verona,  Autorità Garante per la Concorrenza, Associazione Prometeia, Frankfurt Institute for Law and Finance, Banque Centrale du Luxembourg.

He is a member of the Italian Economic Association, the American Finance Association, and the American Economic Association. He has published studies on banking and finance in numerous Italian and foreign journals (see attached list).

He has been a referee for Italian and foreign journals, including: American Economic Review, Quarterly Journal of Economics, Journal of Money, Credit and Banking, Review of Economics and Statistics, Journal of Financial Intermediation, Journal of Banking and Finance, Journal of Development Economics, Journal of the European Economic Association (JEEA), Open Economies Review, Journal of Development Economics, International Review of Economic and Finance, Economic Modelling, Economic Notes, Rivista di Politica Economica, Moneta e Credito, and Politica Economica.








Awarded the “Premio Giornalistico Internazionale Santa Margherita Ligure per l’Economia as the best writer on economics.

Awarded the “Paolo Andreini” scholarship by the Bank of Italy for studies abroad in economics.

Awarded a scholarship by the Ministry of Education for studies abroad in Political Economy.











































OTHER ARTICLES and speeches













































































Working Papers













“Are Mergers Beneficial to Consumers? Evidence from the Market for Bank Deposits”, with D. Focarelli, The American Economic Review, Vol. 93, No. 4, September 2003 (also published in Banca d’Italia, Temi di Discussione (Working Papers) No. 448, July 2002).

“The Interaction between Capital Requirements and Monetary Policy” (2014), with Paolo Angelini and Stefano Neri, Journal of Money, Credit and Banking, Vol. 46, Issue 6, September 2014.

“Do Mergers Improve Information? Evidence From the Loan Market” with Fabiano Schivardi and Matthew Shum, The Journal of Money, Credit and Banking, Vol. 41, No. 4, pp. 673-709, 2009 (also published as Working Paper No. 4961, CEPR, London).

“Why do companies go public? An Empirical Analysis”, with M. Pagano and L. Zingales, Journal of Finance, Vol. LIII, No. 1, 1998.

“The Coordination of Micro and Macro-Prudential Policy in Europe” (2015), with Piergiorgio Alessandri, European Economy, 2015.3.

“Consolidation and Efficiency in the Financial Sector: A Review of the International Evidence”, with D. Amel, C. Barnes and C. Salleo, Journal of Banking and Finance, Vol. 28, No. 10, 2004 (also published as Working Paper 2002-47, Board of Governors, Federal Reserve System).

“The Stability of the Relation between the Stock Market and Macroeconomic Forces”, Economic Notes, 2002, No. 3, (also published in Banca d’Italia, Temi di Discussione (Working Papers) No. 393, 2003).

“Will A Common European Monetary Policy Have Asymmetric Effects?”, with L. Guiso, A. Kashyap and D. Terlizzese, Economic Perspectives, Federal Reserve Bank of Chicago, No. 56, 2000 (also published in Banca d’Italia, Temi di Discussione (Working Papers) No. 325, 2000).

“Why do Banks Merge?”, with D. Focarelli and C. Salleo, Journal of Money, Credit and Banking, Vol. 34, No. 4, November 2002 (also published in Banca d’Italia, Temi di Discussione (Working Papers) No. 361, 1999).

“The Performance of Italian Equity Funds”, with Riccardo Cesari, Journal of Banking and Finance, 26, 2002 (also published in Banca d’Italia, Temi di Discussione (Working Papers) No. 325, 1998).

“The stock market as a source of capital: some lessons from initial public offerings in Italy”, with M. Pagano and L. Zingales, European Economic Review, No. 40, 1996.

 “Les interactions négatives entre banques et états”, with Paolo Angelini and Giuseppe Grande, Revue d’économie financière no. 111, September 2013.

  Supplementary pension schemes in Italy: Features, development and opportunities for workers”, with Riccardo Cesari and Giuseppe Grande, Giornale degli economisti e annali di economia, Vol. 67, 1, pp. 21-40, 2008.



“The impact of sovereign credit risk on bank funding conditions” (2011), published in CGFS Papers No. 43, Bank for International Settlements, Basel (report of the Working Group on Sovereign Risk and Bank Funding Conditions of the Committee on the Global Financial System)


“Financial Sector Pro-cyclicality: Lessons from the Crisis” (2009), coordinator (with Paolo Angelini), Banca d’Italia, Questioni di Economia e Finanza (Occasional Papers) No. 44, April.


Geneva Reports on the World Economy, No. 9: International Financial Stability, (2007), (with Roger Ferguson, Phillip Hartman and Richard Portes), published by International Center for Monetary and Banking Studies (ICMB) and CEPR.

Il sistema finanziario e il Mezzogiorno. Squilibri reali e divari finanziari (2006), editor, with Luigi Cannari, Cacucci Editore, Bari

Il sistema bancario italiano negli anni novanta. Gli effetti di una trasformazione (2004), Il Mulino, Bologna.

La previdenza complementare in Italia: caratteristiche, sviluppo e opportunità per i lavoratori, with Riccardo Cesari and Giuseppe Grande, Banca d’Italia, Questioni di Economia e Finanza (Occasional Papers) No. 8, May 2008.

“The Recent Behaviour of Financial Market Volatility”, Bank for International Settlements, BIS Economic Papers No. 29, August 2006 (report by the Study Group of the Committee on the Global Financial System). 

Le nuove regole sulla liquidità e la politica monetaria (2014), published in Liquidità e nuove regole sulle banche: calibrazione e impatti, (Series ARIME), Franco Angeli, Milano.



Central banking in the XXI century: never say never (speech at “Central banking and monetary policy: Which will be the new normal?” Conference), Università Cattolica, Milan, April 2016.

21st Century cash: Central banking, Technological innovation and digital currencies, published in Do we need Central Bank Digital Currency? Economics, Technology and Institutions, Larcier, SUERF Conference Proceedings, 2018.

Why do banks securitize their assets? Bank-level evidence from over one hundred countries in the pre-crisis period, with A.F. Pozzolo, Banca d’Italia, Tema di discussione (Working Papers) n. 1183, 2018.

The Distributional Consequences of Monetary Policy,  18th Annual DNB Research Conference “Distributional implications of the crisis and policy responses”, Amsterdam, 20 November 2015.

On the special role of macroprudential policy in the euro area, in Putting Macroprudential Policy to Work, DNB Occasional Studies, Vol. 12-7 (2014).

Finanza, rischi e crescita economica (speech at Bocconi University Conference “Benchmarking the UK market: A way to create an efficient and effective capital market in Italy?”), Milano, January 2016.

Prudential policy at times of stagnation: a view from the trenches, with P. Alessandri, Questioni di Economia e Finanza della Banca d’Italia (Occasional Papers), n. 300, dicembre 2015.

 “Why banks and supervisors must act now”, with Mark Carney, Financial Times, 11 July 2011.

La transizione verso un sistema finanziario più stabile, Quaderni dell’Associazione per lo Sviluppo degli Studi di Banca e Borsa, n. 287, March 2015.

The European Banking and Capital Markets Unions: Challenges and Risks, speech at International Conference Foundation for European Progressive Studies e Fondazione Italianieuropei, Roma, 6 February 2015.

Crescita economica e finanziamento delle imprese, Rivista AIAF online, 2015, n. 94.

La nuova vigilanza bancaria europea e l’Italia, speech at  “Le Banche Popolari dal XX al XXI Secolo” Conference, Roma, 19 June 2014.

Imprese: una finanza diversa è possibile, SACE MAG, n. 2, 2014.

The negative feedback loop between banks and sovereigns, with P. Angelini e G. Grande, Questioni di Economia e Finanza della Banca d’Italia, (Occasional Papers) n. 213, January 2014.

Un sistema finanziario per la crescita, Conference Proceedings “Il risparmio degli italiani è al sostegno della crescita?”, The Adam Smith Society, Milano, 27 January 2014.

Il credito e il finanziamento delle imprese, speech at Conference “Reload Banking. La banca del domani per un nuovo sviluppo dell’Italia”, Federazione delle Banche di Credito Cooperativo Lazio Umbria Sardegna, Roma 21 June 2013.

Macroprudential tools: where do we stand?, speech at 2013 Banque Centrale du Luxembourg Financial Stability Review Presentation, 14 May 2013.

Banche, Finanza, Crescita, Quaderni dell’Associazione per lo Sviluppo degli Studi di Banca e Borsa, n. 273, March 2013.

Pro-cyclicality of capital regulation: is it a problem? How to fix it?, with P. Angelini, A. Enria, S. Neri e M. Quagliariello, Questioni di Economia e Finanza della Banca d’Italia (Occasional Papers), n. 74, October 2010.

“Domanda e Offerta di Credito in Italia durante la crisi finanziaria”, with Federico Maria Signoretti, Banca d’Italia, Questioni di Economia e Finanza (Occasional Papers) No. 63, April 2010.

An assessment of financial sector rescue programmes, with T. Faeh, G. Grande, C. Ho, M. King, A. Levy, F.M. Signoretti, M. Taboga e A. Zaghini, Questioni di Economia e Finanza della Banca d’Italia (Occasional Papers), n. 47, luglio 2009.

“Evoluzione del sistema bancario e finanziamento dell’economia nel Mezzogiorno”, Moneta e Credito, Vol. LVI, No. 222, June 2003 (also published in Banca d’Italia, Temi di Discussione (Working Papers) No. 467, March 2003).

“La trasformazione del sistema bancario italiano e i suoi effetti sulle imprese e sui risparmiatori”, with D. Focarelli, (paper given at the conference “Quarant’anni di Economia a Verona”), Banche e Banchieri, No. 4, 2002.

“Il sistema bancario italiano nell’area dell’euro”, with L. Gambacorta and G. Gobbi, Bancaria, Vol. 57, No. 3, 2001.

“Determinanti e conseguenze delle acquisizioni e fusioni bancarie”, with D. Focarelli and C. Salleo, Banca Impresa Società, No. 1, 1999.

“La congiuntura creditizia in Italia” (paper given at Convegno Sadiba 26) Quaderni dell’Associazione per lo Sviluppo degli Studi di Banca e Borsa, No. 198, March 2003.

“Le banche e i servizi finanziari alle imprese” (paper given at Convegno Sadiba 25), Quaderni dell’Associazione per lo Sviluppo degli Studi di Banca e Borsa, No. 185, March 2002.

“Is There an Equity Premium Puzzle in Italy? A Look at Asset Returns, Consumption and Financial Structure over the Last Century”, with Roberto Violi, Banca d’Italia, Temi di Discussione (Working Papers) No. 339, 1999.

“Portafogli gestiti e tassi di rendimento: alcune considerazioni”, with Riccardo Cesari, Bancaria, No. 1, 1998.

“Innovazioni strutturali nel mercato azionario: gli effetti della contrattazione continua”, with C. Impenna and P. Maggio, in Rapporto IRS sul mercato azionario, Istituto per la Ricerca Sociale, Milano (also published in Banca d’Italia, Temi di Discussione (Working Papers) No. 248, 1995).

“La volatilità dei corsi dei CCT e i coefficienti patrimoniali del Comitato di Basilea”, with F. Drudi, il Risparmio, No. 3, 1994.

“I tassi d'interesse reali: l'esperienza degli ultimi trent'anni (1960-1992)”, with A. Levy, in L'alto prezzo del danaro, P. Ciocca and G. Nardozzi (eds.), Laterza, Bari, 1993 (also published in Bancaria, No. 4, 1994).

Privatizzare: come? Spunti da una ricognizione comparata dei casi inglese e francese, with S. Chiri, Banca d’Italia, Temi di Discussione (Working Papers) No. 197, 1993.

“Rischio di tasso d'interesse e coefficienti patrimoniali: un'applicazione di modelli multifattoriali”, with F. Drudi, Finanza, Imprese e Mercati, il Mulino, No. 3, 1992.

“Rischio di tasso d'interesse e coefficienti patrimoniali: un'analisi dei regolamenti SIM”, with F. Drudi, Banca d’Italia, Temi di Discussione (Working Papers) No. 180, 1992.

“Il mercato finanziario italiano nel processo di integrazi­one economica europea”, Il Risparmio, No. 5, September-October 1992.

“Gli effetti della quotazione internazionale: il caso delle azioni italiane a Londra”, Finanza, Imprese e Mercati, Il Mulino, No. 3, December 1991 (also published in Banca d’Italia, Temi di Discussione (Working Papers) No. 156, 1991).

“La struttura fattoriale del mercato azionario italiano”, in Ricerche applicate e modelli per la politica economica, Banca d'Italia, Vol. II, 1991.

“Evoluzione e performance dei fondi comuni mobiliari ita­liani”, with E. Zautzik, Il rischio azionario e la Borsa, edited by Centro Baffi dell'Università Bocconi (also published in Banca d’Italia, Temi di Discussione (Working Papers) No. 142, 1990).

“Organizzazione ed efficienza del mercato azionario”, Economia, società e istituzioni, October 1989.

Evoluzione recente del sistema finanziario italiano: effet­ti sull'allocazione del risparmio e sulla struttura del­l'intermediazione finanziaria, Atti del Convegno “I gruppi plurifunzionali nelle strategie di mercato delle banche e delle assicurazioni”, Trieste, November 1989.

“Recent Changes in the Organization and Regulation of Capi­tal Markets in Italy”, with C. Caranza and R. Pepe, in Changes in the Organization and Regulation of Capital Markets, Bank for International Settlements, April 1987.



“Monetary Policy and Macroprudential Policy”, with Paolo Angelini and Stefano Neri, Banca d’Italia, Temi di Discussione (Working Papers) No. 801, March 2011. Also published in European Central Bank, Working Paper No. 1448, July 2012.

Why Do Banks Securitize their Assets?  with Alberto Pozzolo. Mimeo, Banca d’Italia.

The Causes and Consequences of Going Public, with Andrea Generale and Federico Signoretti, mimeo, Banca d’Italia.

How Interest Sensitive is Investment? Very (when the data are well measured), with Luigi Guiso, Anil Kashyap and Daniele Terlizzese, mimeo, Banca d’Italia.




Questionnaire to the candidate for the position of

Executive Board Member of the European Central Bank

(Fabio Panetta)



A. Personal and professional background


1. Please highlight the main aspects of your professional skills in monetary, financial and business matters and the main aspects of your European and international experience

I have been a central banker for my entire professional life. I joined the Bank of Italy in 1985 and became a Board member and Deputy Governor in 2012. I am now Senior Deputy Governor. I am also Chairman of Italy’s Insurance Supervisory Authority (IVASS) and, as part of this role, member of the General Board of the European Systemic Risk Board.

Together with the other members of the Governing Board of Bank of Italy I have the responsibility, as Senior Deputy Governor, to manage the day-to-day business and to define the strategic orientation of the Institution over a wide range of issues. Bank of Italy responsibilities include, among other things: contributing to the decisions on the euro area monetary policy and implementing them in Italy; supervising both banks (within the Single Supervisory Mechanism) and non-bank intermediaries; supervising the Italian sovereign securities markets and the Italian market infrastructures; supervising and ensuring the smooth functioning of the Italian payment system and providing payment services to the euro area (we run TIPS, Target2 and Target2 Securities);[3] adopting macro-prudential policies. Bank of Italy is also responsible for anti-money laundering and the contrast of terrorism financing.[4]

Over the course of my career, I have gained in-depth experience in a wide range of central bank activities and have shown leadership in tackling new issues. I joined the Bank of Italy's Research Department in 1985; in 2007 I became head of the Economic Outlook and Monetary Policy Directorate. In 2011 I was appointed Managing Director with the task of coordinating the Bank's activities relating to the Eurosystem and to financial stability. In the Governing Board, over time I have been responsible, among other things, for monetary policy operations and for banking supervision.

Since 2004 I attended the meetings of the ECB Governing Council, first as accompanying person and then as Alternate Member. This has given me the privilege of experiencing the momentous initial years of the single monetary policy. I also participated in the policy making process all through the challenging period of the financial and sovereign crises. I have actively contributed to the establishment of the Banking Union (BU) as member of the Supervisory Board of the Single Supervisory Mechanism (SSM) since its creation in 2014 until July 2019.

Participation in international fora has allowed me to observe first-hand the importance of international cooperation. Among other things, I have been member of the Committee on the Global Financial System of the Bank for International Settlements (BIS), of the ECB Macroprudential Forum (as member of the Supervisory Board), of Board of Directors of the BIS (I am currently one of its alternate members). I am Italy’s alternate member in meetings the Group of Seven Countries (G7) and the Group of Twenty Countries (G20) finance ministers and central bank governors.

I am a member of the Board of Directors of the International Center for Monetary and Banking Studies (ICMB) in Geneva.

Alongside a long and diversified experience in policy issues, I have an academic-type background, with publications on monetary and banking issues in international journals.


2. Do you have any business or financial holdings or any other commitments which might conflict with your prospective duties, and are there any other relevant personal or other factors that need to be taken account of by the Parliament when considering your nomination?


No. As a member of the Bank of Italy’s Governing Board, I comply with high standard on matters such as conflicts of interest, confidentiality, external mandates, policy on acceptance of gifts and other benefits, and financial investments in compliance with the Bank’s core values: independence, impartiality, honesty and discretion. As former member of the Supervisory Board, I signed off and comply with the Ethical Code, transparency requirements and investment restrictions applying to the decision-making bodies of the ECB. As Chairman of Italy’s Insurance Supervisory Authority, I comply with the Code of Conduct and transparency requirements of IVASS.

I have no affiliation to private organizations. I have no investment nor involvement in any financial or non-financial company.


3. What would be the guiding objectives you will pursue during your mandate at the European Central Bank?


Firmly pursuing the mandate of maintaining price stability is the greatest contribution the ECB can give to building a stronger, more resilient, more prosperous and more equitable Europe. Ensuring that the ECB delivers on its mandate, in accordance with the EU Treaties, is and will continue to be the primary guiding principle of all Executive Board members.

At the same time, the ECB must be constantly alert to the possible unintended consequences of its policies for the stability of the financial system, particularly when new tools are used. In these circumstances, a high level of vigilance is necessary to detect any such effects as early as possible; economic and financial conditions must be continuously scanned in all directions, with no preclusions nor prejudices. 

As regards the internal functioning of the ECB, the organisational culture that can best ensure the successful pursuance of those objectives is one that encourages the adoption of a pragmatic, data-driven and open-minded approach at all levels within the institution. If appointed in the Executive Board, I will constantly strive to further promote such culture.

As I will explain more clearly in subsequent answers, if appointed in the Executive Board I will also strive to further develop a stronger culture of empowerment and equal opportunities regardless of gender, nationality or other distinctions.


B. ECB monetary policy


4. In your view, how should the ECB conduct its monetary policy in the current macroeconomic conditions? How do you see the ECB’s performance regarding the achievement of its primary objective of maintaining price stability?


The ECB’s actions must remain guided by its primary objective to maintain price stability in the euro area. In this respect, recent data indicate that the inflation outlook seems to fall short of the Governing Council’s inflation aim of below but close to 2%, and hence calls for an accommodative monetary policy: the incoming information (both hard data and soft information) suggests that the slowdown in growth is proving to be more protracted than expected just a few months ago, due to the ongoing weakness in international trade and to persistent global uncertainties that impinge in particular on manufacturing, and more generally on firms’ confidence and their propensity to invest. As past experience consistently shows, a protracted slowdown in the manufacturing sector tends to spill over to other key parts of the economy, such as the services sector.

In a slowing economy, both current and projected inflation remain subdued and not in line with the aim of the ECB’s Governing Council. More importantly, this comes with a risk of a downward shift of inflation expectations of households and firms, that if not contrasted may make price stability harder to achieve. This means that monetary policy support is needed to ensure that financing conditions remain favourable, so as to strengthen investments, confidence, employment and, this way, wage and price growth.


I believe the ECB has been largely successful in attaining its primary objective. Upward pressure on price developments remained always contained. During the crisis the euro area faced the unprecedented risk of deflation and the ECB had to expand its toolkit beyond the standard policy instruments. The challenges posed by such a situation were met by the ECB monetary policy, which prevented the materialisation of deflationary risks and arrested the downward deterioration in inflation expectations, thus supporting economic growth and employment. Economic analysis and the past experience of other countries indicate that deflation is a pernicious illness that is difficult to eradicate and that can precipitate the economy into a vitious spiral of falling demand, lower economic activity, higher unemployment and financial instability, especially when the economy is characterised by high debt levels.


5. What do you think about the 12 September ECB Governing Council stimulus package, and decision on forward guidance? How do you view the way this decision has been made, in particular in light of the public opposition of some members of the ECB Council following the decision? More generally, how do you view the way monetary policy decisions have been made in the past and do you think it should be changed and, if so, how?


The package of measures adopted by the Governing Council of the ECB in September was a proportionate and appropriate response to the macroeconomic situation that I described in my previous answer. In line with the ECB primary mandate to maintain price stability, the decision aimed at countering the risk that a persistently low level of inflation, induced by economic weakness, could degenerate into a permanent reduction in inflation expectations or even in a re-emergence of the threat of deflation. The policy package adopted by the Governing Council will provide the necessary support to economic activity and inflation.

I understand, also from the public debate, that the Governing Council’s views were unanimous on the appropriateness of an accommodative monetary policy stance. At the same time, there were different views on the specific monetary policy instruments that were better-suited to provide the necessary support to the growth and inflation outlook. This is not surprising, as uncertainty about the relative effects of the individual non-standard instruments is naturally high and widespread at this stage. I consider it a sign of a frank and constructive debate.

In my experience, the monetary policy decisions of the Governing Council are always taken on the basis of a thorough analysis of domestic and global economic and financial conditions and of the pros and cons of different options. This allows all Council members to express their views and to try to reach a consensus whenever possible. Adequate provisions are available to come to a conclusion in case of disagreements. In a large decision-making body it is inevitable – and, I think, healthy – to have different views. The governance in place ensures that a fair debate is always possible but also that the Governing Council can always reach operational conclusions. All in all, empirical analyses suggest that the measures taken by the ECB Governing Council have so far been effective in supporting domestic demand and inflation.


6. How do you evaluate the effects of low interest rates?


The evidence I am aware of indicates that the effect of low and even negative interest rates on the economy as a whole has been large and positive. The transmission of the ECB’s low or even negative interest rates to financing conditions of firms and households has proceeded well and was further enhanced by signalling effects via interest rate expectations.

At the same time, the risk of side effects of low and negative rates, if they are maintained for an extended period of time, remains. There are concerns that, beyond some level, negative policy rates may have adverse effects on households’ saving and consumption behaviour, on banks’ lending policies and on the profitability of financial intermediaries. The tiering system introduced in September by the Governing Council aims at mitigating such problems (helping banks to cope with the direct cost of holding negatively-remunerated excess liquidity in their central bank accounts) in order to preserve the transmission mechanism of monetary policy.

The low interest rate environment supports economic activity also by encouraging economic risk-taking. There are however also concerns that in some market segments the increased risk taking may pose risks to financial stability. It is important that the ECB keeps constantly monitoring these risks. In most cases, however, such risks are best addressed by pulling on other policy levers, particularly when they are localised in specific countries or markets. Macroprudential policies, which can be tailored to the circumstances of individual countries or sectors (such as real estate), are best placed to address any excesses in asset price dynamics.

At the current juncture the benefits from the ECB’s measures, including negative rates, still exceed their potential side effects. Continuous monitoring is needed, however, to assure that this statement remains valid. Going forward, the Governing Council can review the measures in place and decide on further mitigating measures if the net benefits of some of them are assessed to be waning.


7. Twenty years after the introduction of the euro, do you think the time has come for conducting a review of the ECB monetary policy framework?


I am aware that President Lagarde already indicated, both in her responses to the European Parliament and in a recent speech, that a strategic review will be launched in the near future.

I think that the current framework has been largely successful. Still, a review is appropriate and needed in many respects, considering that since the start of the Economic and Monetary Union the macroeconomic environment has changed (not only in the euro area, but also at the global level) and it is important to draw conclusions on lessons learned from the financial crisis. Other central banks conduct policy reviews at regular intervals; the previous review by the ECB dates back to 2003, so it is time for another one.

A thorough review will help ensure that the ECB monetary policy framework continues to meet the ECB’s mandate as outlined in the Treaty on the Functioning of the European Union. If appointed to the Executive Board, I would approach these discussions with an open mind, like the President herself. I would suggest that they take into account recent thinking on monetary policy and the experience of these momentous years, both in Europe and abroad. I am sure that all Council members – with the support of staff –would contribute to the exercise in a constructive way, with dedication and enthusiasm, bringing their experience, as it was always the case in the past.


8. How will you ensure transparency regarding the implementation of the APP? Do you agree that more transparency could be provided on the Asset-Backed Securities Purchase Programme (ABSPP) and the third Covered Bond Purchase Programme (CBPP3)?

The ECB as a public institution has the responsibility to be as transparent as possible. Transparency, including on aspects of monetary policy implementation, helps the public to understand the ECB’s monetary policy. Better public understanding, in turn, makes the policy decisions more credible and effective and contributes to the ECB’s accountability. This is especially the case in exceptional times, when unconventional policy measures must be explained to the public with clarity and constant reference to the price stability mandate.

As regards the implementation of the asset purchase programme (APP), I think that that the degree of transparency is already quite high. The ECB publishes on its website detailed information on monthly purchases, total holdings, and redemptions coming due in each sub-programme of the APP and is transparent on the principles guiding the purchases. For the Asset-Backed Securities Programme, for instance, the ECB also communicates which tranches (senior, mezzanine or equity) of an issue may be purchased, the maximum share of the outstanding amount of a tranche that can be bought, which instruments can be included in the pool of the underlying assets.

Having said that, however, I believe that central banks transparency should not go too far, as in some cases excessive transparency could undermine the effectiveness of monetary policy measures. For example, there are good reasons why the ECB should refrain from publishing, for certain purchase programmes, the precise holdings of individual securities and why it should not allow its counterparties to disclose the amount and type of securities that it purchased. In fact, this information could allow market participants to try and front-run the central bank, which could lead to potentially severe dislocations in the prices of specific securities, increase costs for the Eurosystem and reduce the effectiveness of the programme. Suggestions that would increase transparency without these negative side effects would be welcome and if appointed to the ECB Board I would be committed to carefully evaluate them.


9. What are your views on the risks associated with the Corporate Sector Purchase Programme (CSPP)? How do you evaluate the currently increasing share of the CSPP on the primary market and at the same time the currently decreasing share of the public sector purchase programme on the secondary market?


The ECB buys corporate bonds under the CSPP in the primary and secondary market, according to pre-defined eligibility criteria and limits in terms of the share of issuances and issuers, that take into account the risks associated to specific sectors. These rules are complemented ex ante by a careful due diligence and, after the purchase, by a constant monitoring process in order to limit risks. The mismanagement of risks could affect the credibility and reputation of the central bank.

The Eurosystem adapts its CSPP purchases to market conditions, taking into account the liquidity of secondary markets. Purchases also take into account seasonal patterns in issuance and are subject to some smoothing mechanisms. The benchmark used for purchases proportionally reflects all eligible outstanding issues. Thus, market capitalisation provides the weight of each jurisdiction of issuance in the benchmark.

The CSPP has been effective in improving the financing conditions of euro area non-financial corporations. Even though the purchase of corporate bonds entails a somewhat higher level of risk than other assets traditionally held by central banks , the CSPP has proven to be risk-efficient, if one evaluates the risk taken in relation to its contribution to the achievement of the policy objectives. Together with the purchases of asset-backed securities and covered bonds, the CSPP can maximise the direct impact of the APP on the real economy.

Given the limits to sovereign bond holdings and the ensuing feasibility constraints for the PSPP, a relatively larger contribution of the private sector component improves the overall flexibility (and potential scope) of the APP. It also helps to contain the size of possible deviations of the PSPP stocks from the capital key (the benchmark used for the allocation of the PSPP purchases across different countries).

At any rate, Government bond purchases in the secondary market remain the main component of the APP.


10. How in your view can the ECB contribute to economic growth, ecological transition and full employment while fully complying with its primary objective to maintain price stability? Are there in your view possible additional monetary policy measures that would improve the positive effects on the real economy?


The Treaty stipulates that, without prejudice to its primary goal of maintaining price stability, the ECB shall also support the general economic policies of the European Union in order to achieve their objectives. These include balanced economic growth, full employment and protecting and improving the quality of the environment.

The experience of the last few years has confirmed that, by maintaining price stability, the ECB contributes to the prosperity of the euro area. Risks to the inflation outlook did not come in isolation, but went hand-in-hand with poor growth, low employment and stagnating wages, increasing inequality, and threats to financial stability. In providing for an accommodative monetary policy, the ECB’s measures support consumer spending and business investment, thus supporting growth and employment in the euro area and in turn improving the inflation outlook. The ECB’s measures have contributed to a strengthening of the euro area labour market, which has seen about eleven million jobs created since mid-2013 and remains resilient.

A vital challenge for the whole planet is how to deal with climate changes ‒ which constitute a threat to growth and prosperity and to the stability of the financial system ‒ and how to contribute to a more sustainable use of the available natural resources. While central banks are not the closest institutions to the environmental policy action, they can and must do their share (see also the answer to the next question).

At the Bank of Italy we are moving in such direction. As Chairman of the Investment Committee, I steered the investment policy of our pension fund towards the integration of these concerns in the allocation of our assets, excluding companies operating in sectors that do not satisfy the criteria of the UN Global Compact and giving preference to firms with the best Environmental, Social and Governance scores. Overall, as a result of the new criteria there will be an improvement in the environmental footprint of the Bank of Italy’s equity portfolio in terms of total greenhouse gas emissions (down by 23 per cent, equivalent to -0.76 million tons), energy consumption (down by 30 per cent, equivalent to 7.67 million gigajoules) and water consumption (down by 17 per cent, equal to 6.95 million cubic meters). These improvements to the footprint of the equity portfolio are equivalent to cancelling the annual energy consumption of about 140 thousand households and the water consumption of more than 123 thousand households. The results are also significant in the reduction of greenhouse gases: the decline is equivalent to 185 thousand households cutting their annual emissions to zero. Looking at the financial side, this approach has not resulted in worse returns or higher risks.

The Bank of Italy, like the ECB, actively participates to the workstreams of the Network for the Greening of the Financial System – whose objective is to help increase the awareness of climate change risks in the central banking community – and to national and international technical groups on climate-related issues.

Central banks should also encourage financial intermediaries to integrate climate-related and social risks in their decision-making processes, in order to improve their pricing of such risks and steer the allocation of financial resources in ways that are more attentive to these issues.

With respect to additional measures to improve the real economy, the ECB’s decisions in September have contributed and are contributing to ensuring favourable financial conditions to firms and households, supporting investment, consumption, employment and wage growth. It is important that monetary policy continues to do its job. These measures have contributed to job creation in the euro area (more than 13 million jobs were created from 2013 to 2019). Empirical analyses by the ECB and national central banks indicate that the net effects of these policies reduced the inequality in income distribution (as unemployment is the main source of disparity). 


11. What is your view on the steps needed to finance the European Green Deal?  What are your views on the impact of the ECB policy on climate change? Do you think the ECB should bring its asset purchases in line with the UN’s sustainable development goals and the Paris climate agreement? Should the ECB’s asset purchase programmes be in line with EU taxonomy framework? What role would the ECB play in the Network for Greening the Financial System?


Addressing the consequences of climate change and shifting towards a low-carbon system is a crucial task, which requires a collective effort. In this respect, I can only welcome the priority given by the new European Commission to such an urgent issue that will shape the welfare of the present and future European citizens.

In order to achieve the targets agreed by the Paris agreement, we need to correctly price the risks that come from carbon-intensive activities, in order to stimulate the necessary changes in production and consumption patterns. For this purpose, carbon pricing is a key policy tool that will not only change relative prices, but will also provide incentives to higher energy efficiency. This transformation must be enacted ensuring a fair distribution of the burden that it implies and having in mind the social consequences of these policies, with a broader view of promoting the sustainable development goals defined by the UN and of protecting the most vulnerable.

It is foremost a responsibility of the governments to define the appropriate measures to achieve these objectives. Having considered that climate change is an externality of global nature, international coordination of such policies in this field has to be welcome.

The energy transformation needed to curb emissions in line with the ambition of the EU targets will need considerable investment in both physical infrastructure and intangible capital (including R&D). The EU budget and especially the EIB have a crucial role to play, but private financial resources need also to be mobilised. In this respect the EU can further scale-up its efforts and build on the actions already started with the sustainable finance action plan.

The ECB President has indicated that she will make the reflection on how the ECB can contribute to addressing climate change one of the priorities of her mandate. Climate change could pose risks for economic growth and for the stability of the financial system, and thus it can influence the environment in which monetary policy operates. It is therefore important, while staying within its mandate, for the ECB to better understand the channels through which climate-related risks affect the economic and financial system, identify the potential shocks relevant for the short and medium-term inflation outlook and the possible effects on monetary policy transmission, and take action if needed. 

The creation of the Network for Greening the Financial System (NGFS) has been an important step forward in defining and promoting best practices by central banks and supervisory authorities. The major central banks – including the ECB and the Bank of Italy – are actively contributing to the Network, following up on the recommendations issued in the NGFS reports so far. The ECB can significantly contribute in studying possible ways to integrate environmental and climate risks into central banks’ activities, also exploring how to include these risks into its micro- and macro-prudential supervision.

On this, the Bank of Italy cooperates with the European Banking Authority in studying the risks that sustainability factors pose to financial stability, drafting methodologies to assess these risks and identifying suitable prudential responses.

As far as the ECB’s balance sheet is concerned, one needs to appreciate that the current accommodative monetary policy stance is already providing very favourable financing conditions for governments to finance the transition to a low-carbon economy. Moreover, as part of the APP, the ECB has purchased considerable amounts of green bonds, contributing to the development of the market. As sustainable investments opportunities and sustainable finance products become more mainstream, the share of sustainable assets (such as green bonds) in the ECB APP will also increase.

In this regard, the EU taxonomy of environmentally sustainable activities and green bond standards will be key in providing clarity and transparency to investors and stimulating the growth of sustainable finance.

It might be worth reflecting on whether a risk-based taxonomy could complement the current approach and better assist public authorities, including central banks, in identifying which assets are the most exposed to physical and transition risks. In fact, in general such risks are currently not adequately reflected in the financial asset prices; the forthcoming application of the new EU rules on disclosure will provide more information on the sustainability profiles in a furtherly-harmonized way, which can enhance the fair valuation by market participants.


12. Should the ECB in your personal view buy more EIB bonds to help financing European investments in line with the ECB primary and secondary objectives?


The ECB has already purchased over 230 billion worth of bonds issued by the EIB and other supranational institutions under its public sector purchase programme. Since the EIB is a public sector entity, its bonds can only be purchased in the secondary market and the total amount of holdings is subject to a maximum limit. In 2016 the Governing Council increased this limit for EU supranational bonds from 33 to 50 percent of their volume, i.e. above the corresponding ceiling for Government bonds. The net purchases of supranational bonds have resumed in November, as part of the new round of net PSPP purchases.

An important feature of the EIB is that it acted as a pioneer of green bond issuance over ten years ago, and continues its strong engagement in the green bond market nowadays. The Eurosystem has bought EIB green bonds along with other green issues in the euro area, thus contributing to the financing of climate action projects.


13. What is your view on the implementation of the Emergency Liquidity Assistance (ELA)? What could be improved in the decision-making process on granting ELA?


Emergency Liquidity Assistance (ELA) operations are designed to provide support to solvent banks facing temporary liquidity problems. According to the ESCB Statute, the provision of ELA is a national responsibility. As a result, the decision to grant ELA is at the discretion of NCBs, which incur the costs and risks of such operations. The main pre-requisites are the solvency of the bank or, in case the bank is in breach of the CRR own funds requirements, the existence of a credible recapitalization plan, together with the availability of sufficient collateral acceptable by the respective NCB.

In recent years, the Eurosystem has made important progress towards the harmonization of the ELA frameworks of different NCBs, with the approval of a comprehensive ELA framework and an ELA agreement, published on the ECB website in May 2017. With a view to preventing any possible interference on the single monetary policy, the agreement defines the allocation of responsibilities and the process for information sharing among the NCBs and the ECB. The Governing Council may also be involved in the decision process, depending on the size and duration of the operation.


In recent years, I have been personally involved several times in the provision of ELA. In my experience, the current procedures have generally proven to be effective in safeguarding financial stability and containing contagion risk. Even for the significant institutions, which are under the direct supervision of the Single Supervisory Mechanism, NCBs have been able to accurately assess the elements required for a smooth, effective and timely action. As a result, the single monetary policy of the Eurosystem has always been preserved, as requested by the Treaty.


14. Which role do you think the ECB should play in addressing virtual currencies? Which chances and risks do you see with regard to virtual assets? What would you consider an appropriate regulatory framework for virtual currencies (and “stable coins” in particular) to look like?


The most recent wave of technological innovation is bringing deep changes to the supply of financial services and to the nature of the actors providing them. Blockchain technology and virtual assets are part of this revolution. They hold the promise of delivering a more efficient way of transferring money, in particular across borders, but they present significant risks.

The ECB, like other central banks, is paying close attention to these developments. Several aspects of virtual assets and the so called stable-coins call for a coordinated action of public authorities beyond central banks (e.g. AML authorities, tax authorities, standard setting bodies, etc.). Nonetheless, to the extent that virtual assets, especially stable-coins, aim at facilitating the holding and transfer of money, their operations fall under the remit of the Eurosystem oversight framework for payment systems or payment schemes.

While it is not in the power of central banks, but of Governments and Parliaments to decide if the issuance and the circulation of virtual assets should be permitted, the ECB has a role to play in regulating and overseeing them, in order to avoid threats to financial stability and ensure that euro area payment systems remain safe, efficient and innovative, capable to meet citizens’ rising demand for immediacy and user-friendly interfaces.

Given their inherent riskiness, private stable coins may not represent an adequate solution to provide safe, efficient and innovative retail payment services. In fact, they present a wide range of hard-to-address challenges that have been identified by the international central banking community. For instance the recent Report on Global Stable Coins (GSCs) by the WG of the G7 Deputies – of which I was a member – pointed out that they often lack a clear governance and legal framework, so that regulators cannot clearly identify the subject to be held responsible to protect users and investors. Stable-coins present risks also in terms of operational resilience, cyber security, data protection, money laundering and tax compliance.

The general principle to be applied in regulating virtual assets and stable coins is that of technological neutrality and proportionality, according to the “same business, same rules” principle. Regulators should focus on new business models and on the risks stemming from the new technologies, that were not contemplated when current regulations were introduced.

However, the task of regulators is made complex by the lack of information on the specific projects and by the fact that relevant aspects of such projects are often preliminary and unclear. This is one reason why a regulatory response might not be enough to contain risks at this stage.

The stable coin initiatives that can gain a global footprint can create wider problems; and reaching a “global footprint” is not a remote hypothesis when stable coins are backed by BigTech giants. Any private stabilization mechanism, no matter how well designed, will present market risk, credit risk or liquidity risk. Those risks could undermine confidence and trigger a ‘run on the coin’, absent a lender of last resort.

As the recent Report on Global Stable Coins (GSCs) by the WG of the G7 Deputies (of which I have been a member) shows, the transmission channels of monetary policy might also be affected, to the extent that a widely used stable coin could make consumption and investment less sensitive to changes in policy rates. In weaker countries, whose currency is not part of the stabilization basket of currencies, this might even lead to a complete “dollarization” of the economy.

The appearance of GSCs projects is a wake-up call for authorities and central banks that cannot be answered solely with appropriate regulation, since regulation could prove insufficient to stem all the risks of a successful project. We cannot and should not stop technologies from changing our financial system, making it more efficient and inclusive, but we must be aware of the far reaching consequences of these innovation and guide them, if needed by intervening directly in the new ecosystems they create, so that financial stability and monetary policy effectiveness are not put under jeopardy.


15. How do you assess the interactions between payment systems and monetary policy? What should be the role of the ECB, as central bank of issue, on Central Counterparty Clearing houses (CCPs)?

The Eurosystem has the task of promoting the smooth functioning of payment and settlement systems, which are necessary to preserve the stability of the financial markets and to allow the smooth implementation of monetary policy. When payment systems do not work properly and funds cannot be orderly transferred between counterparties, the price formation process in both the capital and money market might be severely impaired and the monetary transmission mechanism become dysfunctional.

The relevance of the payments system from a monetary policy perspective is especially high for what concerns large value interbank transactions. For this reason, the Eurosystem owns and operates the euro area Real Time Gross Settlement system, TARGET2. This system, which settles bank-to-bank and commercial transactions and is used for the implementation of monetary operations, has supported the development of a common money market in the euro area, a necessary condition for the homogeneous transmission of monetary impulses across all Member States.

The importance of the smooth functioning of the payment system for the implementation of monetary policy also explains the interest of the ECB in the financial and operational resilience of Central Counterparties (CCPs). CCPs interpose themselves between intermediaries negotiating in both cash and repo markets, and such activity entails large intraday liquidity flows. This implies that, in stressed market conditions, liquidity or securities shortages by intermediaries can be channelled by or through CCPs, with potentially disruptive effects. In such a situation, the ECB may be called to provide emergency liquidity support to CCPs or to banks participating in CCPs, an additional reason to carefully monitor possible risks stemming from these market infrastructures.

These issues have become more relevant in the aftermath of the financial crisis, as the growth of central clearing amplified the systemic importance of CCPs in the major jurisdictions. In this context, the upcoming implementation of the revised regulatory framework (EMIR 2) represents a welcome development, as it reinforces the EU supervision of systemic third-country CCPs that clear large volumes of euro-denominated instruments, and ensures involvement of the central banks of issue in this oversight.


16. Which role do you see for cash-based transactions compared to digital transactions in the future?

Cash remains the preferred instrument for retail payments in several EU countries. It is a safe asset, directly available to citizens and with unique features, as it guarantees anonymity and can be used in off-line transactions. For these reasons, I believe that cash will play an important role also in the foreseeable future. Central banks must therefore continue to ensure high levels of efficiency in the production and circulation of such instrument. 

The euro area, like other jurisdictions, is nonetheless facing dramatic changes in both the demand and the provision of payment services, fostered by innovations in the digital ecosystem. In such new environment, digital transactions are becoming increasingly popular, and may eventually become more important than cash. The adoption of new technologies in the supply of payment services must be encouraged to the extent that cheaper, faster and more secure services increase competition and financial inclusion, enhancing peoples’ welfare.

17. What are your views on high denominations notes in euros?

The Eurosystem must guarantee at low cost the availability of high-quality euro banknotes to euro area citizens. It must assure a balanced supply of banknotes of different denominations, taking into consideration the fact that small denominations notes are largely used in low-value retail transactions.

High-denomination banknotes are mainly used for reasons that are entirely legitimate, such as to acquire expensive goods or services or as a store of value. The store of value motive is a feature of those currencies, such as the euro and the dollar, that represent a reserve asset. The ECB estimates that a significant part (about one third) of the outstanding stock of euro banknotes is owned by non-euro area agents; the store of value motivation of that component of the stock of euros is likely relevant, although difficult to estimate precisely.

At the same time, concerns that the demand for high-denomination notes may be driven also by illegal activities has induced the Eurosystem to first stop the production of the 500€ notes (in May 2016) and then discontinue their issuance (in January 2019; for Germany and Austria the issuance was terminated in April 2019). As a consequence, the volume of the €500 banknotes in circulation will decline over time; all the existing €500 banknotes in circulation will maintain their value, can be recirculated and remain legal tender.

18. What is your view on the heterogeneity of monetary conditions and access to credit across the euro area and its impact on unitary monetary policy of the ECB?


The monetary measures adopted by the ECB in the last decade provided a crucial contribution to the reduction of the heterogeneity in monetary conditions and credit availability across euro-area countries. During the financial and sovereign debt crises the sizeable divergence in the cost of and access to credit threatened the singleness of the ECB’s monetary policy and the functioning of the transmission mechanism. The bold and unprecedented response of the ECB and its willingness to act decisively, within its mandate, to preserve the euro have been crucial in dissipating the fears of a euro-area break-up, restoring the smooth functioning of financial markets and improving the transmission of the monetary impulses in all euro-area countries.

Since then the ECB has continued to fulfil its mandate and respond to the deterioration of the macroeconomic outlook with substantial easing measures, including the targeted longer-term refinancing operations. These decisions have succeeded in reducing lending rates to firms and households and reducing further the fragmentation of euro area money and credit markets. These more accommodative and more homogenous monetary conditions have been crucial for the recovery of bank lending in recent years and for supporting private investment and consumption.


19. Several EU Member States are preparing to join the euro area. How do you foresee avoiding further divergences between euro area Member States over the coming decade in light of the economic conditions in candidate states? What is the preferred economic scenario of euro area enlargement?


All EU Member States – except Denmark and the United Kingdom, which have an opt-out clause – have the obligation to join the Economic and Monetary Union, i.e. to eventually adopt the euro. Yet, there is no specific timeline to do it, and the readiness and willingness of each Member State will determine the time of the adoption of the single currency. Each Member State’s economic, financial and institutional policies will shape its readiness to join the euro.

The progress toward the Maastricht criteria and the sustainability of the convergence of each non-euro area country is regularly assessed by the ECB and the Commission in their respective Convergence Reports.

On 4 November 2014 the Single Supervisory Mechanism (SSM) became operational in supervising all euro area banks. Hence, euro adoption now also entails participation in the SSM. This is no easy task, and consequently Member States approaching adoption of the euro should enter into close cooperation with ECB banking supervision. This may require specific reform commitments.

The country-specific nature of these obligations seems most appropriate to guarantee a smooth participation in the exchange-rate mechanism and ultimately to the single currency.


20. What are the main risks/opportunities ahead for the euro?


The euro recently celebrated its twentieth anniversary and is currently supported by a record high of 76 per cent of euro area citizens. For a whole generation, the euro is the only currency they have even known. For Europeans more broadly, it stands as the most tangible symbol of European unity. Throughout the crisis, support for the single currency has remained high, underpinning the political commitment to the integrity of the euro area.

The euro has brought important benefits for all citizens, first of all by safeguarding their purchasing power. Average annual inflation since the euro’s introduction has been 1.7%, a level significantly below the pre-euro averages even in the Member States with remarkable performance in maintaining price stability. The euro allows reaping the full benefits of the single market. By eliminating exchange rate risks and the possibility of competitive devaluations between its jurisdictions, it has substantially decreased transaction costs and facilitated trade integration, benefitting customers through lower prices and firms – including SMEs – through tighter value chains. The euro is widely accepted in financial transactions worldwide. This facilitates international trade by euro area firms. Moreover, jointly, euro area countries have a more meaningful voice in the international economic and financial sphere, on topics such as the regulation of international financial markets. Some of the benefits of the euro have also been shared by those non euro-area countries whose exchange rate is tightly linked to the value of the common currency.

This progress can be preserved and reinforced by a stronger and more complete Economic and Monetary Union, including both a capital markets and a banking union, and sound economic policies. Economic convergence between and within Member States is necessary to guarantee the benefits of the euro are shared across the euro area and throughout all components of society.

The euro is certainly also facing new and important challenges such as digitalization and cryptoassets, cyber security and money laundering. The ECB, within its remit, contributes to addressing those challenges and embracing change and innovation. For instance, the ECB plays an active and catalyst role in the construction of a safer, more innovative and integrated payment system in the eurozone. 


21. What do you see as the most important risks and challenges facing the ECB?


Looking ahead, central banks will have to choose an appropriate monetary framework to deal with global macroeconomic scenario characterised by new challenges – such as protectionism, geopolitical risks, ageing societies in advanced economies – that may result in persistently low growth, low inflation, and low interest rates. Economic uncertainty is also likely to increase in the future.

It is important to recall that the unconventional measures deployed by several central banks over the last decade are the response to, rather than the cause of, the current scenario, and that many studies show that without them the situation would be much worse, especially in terms of the real economy. Failure to acknowledge the challenges and to act in a timely, proportionate, and if necessary innovative manner in order to tackle such challenges can ultimately make an even stronger response necessary down the road.

At the same time, as I argued in a previous answer, it will remain vital to constantly monitor the side effects and the net benefits of unconventional measures: for example, beyond some level, negative policy rates may have adverse effects on banks’ lending behaviour, on the profitability of financial intermediaries (lower profitability could affect banks’ lending policies and thus the transmission of monetary policy).

In some market segments, excessive risk taking by investors and financial intermediaries may pose risks to financial stability, which, if need be, will have to be promptly addressed by a more active use of macroprudential instruments.

Given the increasing complexity of the financial landscape and the evolution of its policy measures, the ECB may need to adjust its communication in order to clearly explain its policies to the wider public. Only if citizens – workers, savers, investors, pensioners – understand the role, the objectives and the policies of their central bank can they elaborate realistic expectations toward them and plan their future. This will contribute to define the desirable broader economic policy mix and the future economic course of the eurozone.

I already mentioned that the ECB will also have to engage in a wider debate on how it can best contribute to addressing the challenges of climate change.

Yet another challenge is given by the impact of the on-going digital transformation on the economic and financial system. The integration of new technologies in the supply of financial services (Fintech) must be encouraged, to the extent that cheaper, faster and more secure services increase competition, enhancing peoples’ welfare, and improve financial inclusion among the most disadvantaged. However, easier access to less regulated services also poses new challenges. While some of these – such as consumer protection – fall outside the ECB mandate, central banks are without doubt central to facilitating a smooth transition to the payment landscape of the future.

Central banks themselves are adopting the new technologies. The Bank of Italy started exploiting machine learning and Big Data technologies already years ago. These are now used, among others, to improve macroeconomic forecasting, identify anomalous transactions for AML purposes, and compute real time indicators of financial risk.

Entry of big players in the financial sector and the possible adoption of global digital currencies (GDCs) involve challenges: for banks, for tax compliance, for consumer and privacy protection, for the contrast of money laundering and the financing of terrorism, for cyber risk. Challenges may emerge for monetary policy and financial stability.

These processes must be governed through enhanced cooperation among public authorities at the global level. Central banks are deploying considerable resources to monitor risks and safeguard price and financial stability. The Report on GSCs by the WG of the G7 Deputies (of which I have been a member) provides in-depth analyses and lines for future action.


22. What are the risks related to Brexit for financial stability? How do you view the ECB’s role in addressing those risks?


The extension of the withdrawal deadline granted by the European Council to the UK to 31 January 2020 has only moved further in time, but not reduced, the risk of a no-deal Brexit. Political uncertainty is still present, and this risk may again materialise at the end of the current extension. A no-deal scenario could prove very costly, and could lead to significant bouts of volatility in financial markets.

The ECB and the national authorities are well equipped for that. The ECB and the Bank of England have agreed a currency swap arrangement, which will allow each central bank to offer liquidity to the banking sector in the currency of the other. This should support the orderly functioning of markets and prevent repercussions on households and businesses. The ECB also maintains favourable liquidity conditions and an ample degree of monetary accommodation. It could take appropriate action to safeguard financial stability if funding and liquidity conditions were to deteriorate in the euro area.

Preparations for a no-deal Brexit scenario have been made by both public authorities and the private sector. At the EU and national level, measures have been adopted to address, if necessary, possible disruptions, in particular in the field of cross-border financial services (e.g. central clearing, eligibility of MREL instruments, continuity of contracts and banking and financial licences).

As the ECB and the national authorities have repeatedly stressed, it is essential that market participants continue their preparations and take all necessary measures to address Brexit-related risks. In particular, banks should complete the implementation of contingency plans, and the consequences of Brexit should be fully factored in into recovery plans and resolution approaches.

Cliff-edge risks could potentially arise also in case of ratification of the Withdrawal Agreement. After ratification, the transition period will run until 31 December 2020, with a possible extension of one or two years. During the transition, EU law will continue to apply in the UK, while the EU and the UK negotiate an agreement on future relationship. At the end of the transition, if no agreement has been signed, bilateral relations will revert to the default terms established by international law, e.g. GATT (General Agreement on Tariffs and Trade) for trade in goods and GATS (General Agreement on Trade in Services) for trade in services. For financial services, market access will then be based on EU’s equivalence framework, which has a much narrower scope than the Single Passport.


23. Do you think that the current economic governance framework encourages pro-cyclical fiscal policies? Does it set the right incentives for public investment? What kind of reforms to this framework do you deem necessary? What is your view on further European harmonisation in the field of corporate taxes?

Fiscal policy is a fundamental stabilization tool for any country, and even more so for those sharing a currency, since monetary policy is geared to the economic conditions of the entire monetary area and cannot deal with asymmetric shocks. In order to preserve an adequate fiscal space, each country must pursue medium-term budget targets that take into account its growth potential and debt level.

The current Stability and Growth Pact has achieved mixed results in this regard. In 2018, the aggregate deficits of the EU and the euro area fell to their lowest level since 2000, the corresponding aggregate debt-to-GDP ratios are set on a declining path. However, a number of countries have made little progress in reducing the level of government debt and deficit, resulting in fiscal space being unevenly distributed across Member States, lacking almost entirely in some cases.

Fiscal prudence is primarily the responsibility of Member States, but the fiscal rules have perhaps not created sufficient incentives for all countries in this respect. The European Fiscal Board and others have emphasized that the rules are too complex and rely excessively on non-observable variables such as output gaps. Concerns relate also to the fact that the SGP lacks rules or instruments to steer the fiscal stance of the euro area as a whole and little progress has been made to improve the quality of public finances, irrespective of the fiscal stance.

On the back of these concerns, and the fact that the rules did not ensure a broad-based achievement of sound fiscal positions in economically good times, there was a lack of fiscal space, notably in the 2012-2013 downturn, resulting in a pro-cyclical fiscal tightening and an unfavourable euro area macroeconomic policy mix. Public investment as a share of GDP has also declined significantly since 2009 in the EU and the euro area, by more than 20 per cent in the aggregate, though not in every country.

These weaknesses suggest that a revision of the European fiscal governance framework may be necessary. One option proposed in this respect is to adopt one long-run debt target coupled with one operational instrument, such as an expenditure rule. Simplification is necessary, but it is important to avoid that an excessive distance between the long-run target and the operational instrument fails to provide countries with the right incentives for fiscal prudence. Besides keeping under control public expenditure growth, governments should also increase the quality of their spending by raising the share of productivity-enhancing investment in their spending envelopes.

It is important to note that a revision of the rules can only be part of the answer to the problem. The crisis has emphasized that sound national fiscal policies may not be always sufficient, as deep and protracted economic shocks can overwhelm the national policy space, creating an undesirable negative spirals of private and public retrenchment. This underscores a need for an incentive-compatible euro area fiscal capacity of adequate size to provide macroeconomic stabilization.

The mere coordination of national policies cannot accomplish this function. Fiscal space and macroeconomic conditions differ across countries, and the former is not necessarily available where it would be most needed. National policies react primarily to national conditions rather than to euro area developments. Even assuming that national policies would internalize the necessities of the euro area, the spill-overs between countries would remain rather limited. That is why a sizable common fiscal capacity, in combination with effective fiscal rules, is necessary.

Further harmonising corporate tax bases could usefully contribute to the functioning of the Single Market, the banking union and the capital markets union. Aggressive tax practices can hamper competition, compress tax revenues and be considered unfair by citizens. They can undermine cohesion among Member States, which is crucial to the enhancement of the European construction.


24. Do you think that the Euro area needs a European Safe Asset not only to help stabilise the financial markets and allow banks to reduce their exposure to national debt, but also as a way to facilitate the correct transmission of the monetary policy? How could this be achieved?

Safe assets represent a key element of any financial system and the benchmark for the efficient pricing of risky assets. For these reasons, they are vital for bank intermediation.

Safe assets are seen as scarce in the current environment and their scarcity has come to be seen as impacting financial markets and the banking sector, monetary policy implementation and economic growth. The financial crisis has reinforced investors’ preference for safeness, effectively decreasing the availability of safe assets. At the same time, a number of factors (e.g. new regulatory initiatives, demographic developments in advanced economies) have increased the demand for safe assets. The euro area is a unique example of a currency union without a common safe asset.

The introduction of a European safe asset would likely mark decisive progress in the completion of the banking and capital markets unions. Also the conduct of the non-standard monetary policies would be easier and less controversial if it could rely on a common euro area safe asset. The reduced risk of market fragmentation would make the transmission of the ECB’s monetary policy more homogeneous across Member States. Finally, a safe asset not affected by the sovereign risk of individual Member States would facilitate cross border financial integration; it would also contribute to mitigate the adverse feedback loop between banks and their sovereigns and the flights to safety that were observed during the crisis.

Safe assets can take many forms. Some solutions may have implications outside the financial domain, for instance if they can serve as an operational tool to build a common fiscal capacity. SBBS and e-bonds are proposals currently discussed but more work is needed on how to design a potential euro area safe asset.

The development of a safe asset is a fundamental issue for the euro area but it falls outside the remit of the ECB’s mandate.


25. What is your view on the ongoing debate on the persistent high levels of public and private debt in the euro area? How do you see the possibility envisaged by the European Commission of a euro area Treasury to access financial markets on behalf of its members to fund part of their regular refinancing needs?

Addressing any problems of debt overhangs is first and foremost the responsibility of national authorities. Decisive policy action is necessary on this front, as the crisis has shown that high levels of private and public debt can be a major cause of vulnerability when the cycle turns. In the crisis, they amplified financial tensions and contributed to deepening the economic crisis, and made the conduct of monetary policy more challenging. 

Looking at the euro area, private debt-to-GDP ratios decreased in the last five years by about 10 percentage points of GDP, to the current level of about 137%. The public debt-to-GDP ratio of the euro area as a whole declined to around 87% of GDP in 2018, down from almost 95% in 2014. Overall levels of debt compare relatively favourably to those of other major economic regions.

But this overall positive picture conceals significant heterogeneities at the level of individual Member States, as identified by the European Semester and the Macroeconomic Imbalance Procedure. Private debt continues to be high in some countries. Public debt levels are still high and not in line with the requirements of the European fiscal framework in a number of Member States.

The current environment of low interest rates is an opportunity to accelerate the reduction of public debt-to-GDP ratios with sound fiscal policies and a more growth-friendly composition of public finances, by shifting resources to public investment. A lower public debt would also reduce the distortions due to the high fiscal pressure and to re-launch investments in physical and human capital. Moreover, the implementation of reforms aimed at modernizing euro area economies can be most helpful to boost the potential for economic growth and create also greater fiscal space for the future. 

On the private sector side, macroprudential policies should encourage the gradual rebalancing of debt positions. At the same time, as this as fairly new field of policymaking, more than in others, we should keep in mind that no solution is obviously right or wrong. Therefore, we should also look at other measures that can help private actors to deleverage. For instance, it would be important allow private parties to progress in the disposal of bad assets or improving the efficiency of courts in tackling backlogs of sour loan cases.

The European level can help on both fronts. In the short-term, European effective fiscal and economic rules can support and incentivised sound domestic policy making. Moreover, the strengthening the Single Market, including through a deepening of the banking and capital markets unions, remains one of the most powerful instruments to boost growth and convergence. Beyond the short-term, the creation of a Treasury office for the euro area can further contribute to fulfil some of the European functions mentioned above. Europe’s elected bodies will have to decide on if, how and when to move ahead with such integration, but this step is necessary for the development and prosperity of the euro area.

The creation of a Treasury office would support the definition and the implementation  of a macroeconomic stabilisation of the Eurozone. A euro area macroeconomic stabilisation function would help cushioning large country-specific shocks, thus making the EMU more resilient. Establishing such a tool would also facilitate the introduction of a safe asset for the euro area. The advantage of doing so by means of a euro area fiscal tool is that it would not blur national and European level debt issuance.


26. What are your views on the criticism that the ECB’s collateral framework is not gradual enough and relies too much on external credit rating agencies (CRAs)?

The Eurosystem credit assessment framework for the eligibility of collateral enables banks to mobilise a wide range of assets under a unified risk management framework. Such framework aims at protecting the ECB’s balance sheet while at the same time ensuring an ample and diversified availability of eligible assets for euro area banks.

Haircuts are calibrated so as to yield an equal treatment of assets across different market segments and credit risk categories, thereby allowing for a granular valuation of assets. Banks make extensive use of collateral with the ECB; the total amount currently posted is worth about €1.5 trillion, more than twice the total credit extended by the Eurosystem. This provides evidence on the prudence and effectiveness of the framework and the high availability of collateral, both conducive to a smooth implementation of monetary policy.

In addition to external ratings, the other valid credit quality sources are in-house credit assessment systems by national central banks and internal ratings-based systems of counterparties. For instance, Bank of Italy has set-up its in-house Credit Assessment System to assess the credit risk of loans used as collateral in Eurosystem monetary policy operations. It aims at limiting the financial risk for the Eurosystem, while at the same time enabling counterparties that do not have access to alternative assessment systems to post a greater quantity of collateral

To ensure consistency with the Eurosystem’s high credit quality requirements and comparability across the different sources of credit assessment, each credit assessment system, whether external or internal to the Eurosystem, is subject to an annual performance monitoring process.

The role of the credit assessment systems alternative to credit rating agencies can be fully appreciated if one considers that they are particularly relevant for the pledge of credit claims which, subject to appropriately calibrated haircuts, account for about one quarter of the value of the collateral mobilized.

This approach is in line with the FSB recommendations on the reduction of mechanistic reliance on credit rating agencies. In fact, relying on multiple sources allows for a flexible and independent determination of whether a financial instrument should be eligible in refinancing operations. Nonetheless, the Eurosytem reserves the right to apply risk control measures such as additional haircuts to any individual financial instruments or specific restrictions to any credit assessment system. Moreover, with a view to ensure the reliability of the information used, the Eurosystem subjects its accepted credit assessment sources to a regular review.

Over time, this process has further enhanced the robustness and transparency of all valid credit sources, to allow the ECB to conduct monetary policy in a smooth way and ensure protection of its balance sheet.


27. How do you assess the recent evolution of the EUR/USD exchange rate? To what extent should trade considerations play a role in the conduct of monetary policy?


Exchange-rate movements impact the prices of imported goods and services and aggregate demand, and may therefore affect domestic activity and inflation. For this reason, the ECB should and does closely monitor exchange rate developments. However, in line with the international consensus, the ECB should not and does not target the exchange rate. In order to ensure fair competition and promote international trade, the external value of the euro should be left to be determined by markets on the basis of economic fundamentals. Any attempt to interfere on such mechanism would risk fomenting costly currency wars and would be ultimately bound to fail.


28. How do you assess the achievements of the G20? What are your views on the current level of coordination between the main central banks?

The G20 has played a key role in fostering a common economic policy response to the global financial crisis in 2008 and 2009. It also set the basis for the ambitious reform agenda of the international financial system, with the Financial Stability Board monitoring progress and making recommendations in collaboration with other standard setting bodies.

As the urgency of the crisis faded away, the political resolve to work together in close coordination on common problems seems to have weakened. Some countries have shown growing scepticism toward multilateralism and a rules-based system, while some multilateral initiatives and institutions have suffered serious blows. Let me exemplify this here with two prominent examples: the U.S. pulling out of the Paris Climate Agreement and the likely paralysis of the WTO Appellate Body as of 11 December.

It is then not surprising that the major downward risks to global and euro area economic outlooks today stem from external factors, like trade and geopolitical tensions, that negatively affect growth and investments, both directly reducing demand and indirectly denting confidence and increasing uncertainty.

As a consequence, now more than ever, multilateral institutions and fora are essential to keep an open dialogue and to help preserving economic and financial stability globally. Close international cooperation is needed to address fragilities, develop global safety nets, reduce geopolitical uncertainties and prepare our economies to the challenges and the structural changes stemming from demographic transition, digitalisation and artificial intelligence. In this context, the G20 is today as relevant as before. The G20 together with other fora such as the G7 and institutions such as the International Monetary Fund and the Bank for International Settlements, also fosters interactions among monetary and financial authorities, allowing them to openly share views on how to address the common challenges they face.


29. Should the ECB take concrete steps to boost the euro as an international currency? If so, what measures do you envision?


The euro is already widely used in international markets. In addition to the size of the euro area economy, this presumably reflects a perception by market participants that the euro is supported by a sound and credible policy framework and by well-functioning financial markets. The ECB already contributes to this with its stability-oriented monetary policy and by contributing to the development of stable, deep and efficient euro area financial markets. Such policies are part of the ECB’s mandate, but they have the additional benefit of supporting the euro’s international role. The ECB regularly monitors the international role of the euro, publishing an annual report on it.

Recent ECB research suggests that the euro area economy may on balance gain from a more prominent international role of its currency. A greater international role of the euro would for example facilitate the conduct of monetary policy by lowering the exchange-rate pass-through to inflation and strengthening the transmission of monetary policy impulses. It may also contribute to lower sovereign financing costs. In addition, the euro area and the global economy at large would benefit from a more balanced international monetary system, such as would result from a greater international role of the euro.

In any case, an expanded international role can only be a consequence of market developments, driven by investors’ demand. Policies can help create favourable conditions for this. A more complete Economic and Monetary Union, including deep and diversified capital markets and a complete banking union, supported by sound economic policies in euro-area Member States, would enhance the resilience of the euro area economy and thus make the euro more attractive to international investors.


30. What do you see as the main challenges and opportunities for central bank communication in the period ahead?


Adopting a transparent communication strategy is a key ingredient of modern central banking. First of all, as a necessary counterweight to their independence, in democratic societies central banks are to be held fully accountable by elected bodies; in the euro area context, to the European Parliament. Clear and transparent communication also contributes to improve the effectiveness of policy actions themselves, insofar as it helps orienting markets’ and peoples’ expectations and behaviours.

This is all the more the case in exceptional times, when unprecedented and complex measures are resorted to: the motivations for adopting those instruments, their possible side effects and their benefits for the real economy and for price stability need to be carefully explained. Also, when the policy rate is at or near the effective lower bound and the monetary stance results from the combined implementation of several instruments – as it is currently the case – the importance of forward guidance is magnified. In those circumstances, communication becomes a monetary policy tool of its own.

The ECB has been a frontrunner in adopting a transparent communication framework ever since its inception; over the years such framework has been steadily refined to adjust to the ever changing environment.

As I already mentioned in previous answers, the ECB interacts with the European Parliament in a variety of ways, including the quarterly hearings of the ECB President with the ECON Committee.

As regards communication with the wider audience of market operators and the public at large, monetary policy decisions are presented and discussed (i) by the ECB President and Vice-President in the course of press conferences held on a regular basis, every six week; (ii) in the ECB publications (eg the Economic Bulletin); (iii) in speeches by Executive Board members. Moreover, a few years ago, the ECB started publishing detailed accounts of its monetary policy meetings, which provide comprehensive information about the discussion within the Governing Council and the analysis underlying its decisions. In recent years, central banks, including the ECB and National central banks of the euro area, have also intensified their efforts at directly reaching out ever larger audiences, striving to explain their actions in simpler ways, using new communication channels and more easily accessible language, with the ultimate aim of showing how monetary policy action contributes to making a difference in people’s daily life.

The Bank of Italy has been part of this effort. Since the start of the crisis, we have strengthened our interaction with and accountability to Parliament; since 2014 the Board has appeared in 38 hearings. Moreover, in order to improve our communication with the public we have engaged in an extensive programme to reach out to all areas of society. I have personally participated in meetings with peoples in various Italian cities to explain our policies and those of the Eurosystem. This has contributed to improving people’s understanding of and their trust in such policies.

I have also taken part in Italian television programmes to explain to the public, in plain language, the features and, more importantly, the risks implicit in crypto-assets, especially Bitcoins.


31. How would you assess the monetary policy spillovers, in particular from the United States, for the conduct of monetary policy in the euro area?


Because of the increasing economic and financial integration of the world economy, spillovers from other major economies’ economic regions need to be taken into account in defining and implementing domestic policies. This is particularly the case for US monetary policy decisions, which affect US and global financial and foreign exchange markets.

In its analyses, the ECB regularly takes these spillovers into account. Developments in other economies are monitored, the domestic impact of their policy measures are analysed and the implications for the outlook for price stability in the euro area are taken into account in the formulation of euro area monetary policy. All the monetary policy meetings of the Governing include a comprehensive presentation and discussion of these analyses.

However, as mentioned in the answer to question no. 27, this does not imply that the ECB should in any way target the exchange rate. The focus of the ECB’s monetary policy must remain solely domestic.


C. Financial stability and supervision


32. What are your views on the need to ensure a strict separation between monetary policy and banking supervision and what are in your view the reforms that would enhance and favour such separation?

I believe that there were good reasons for assigning the responsibility of banking supervision to the ECB, such as the synergies between the role of central banks in macro-prudential supervision (which aims at preserving the stability of the financial system as a whole) and the micro-prudential supervision of individual banks. Others were of a more institutional nature, such as the need to set up a European supervision system within existing treaties. Such a setup also allowed the SSM to become immediately operational by utilizing the infrastructure (e.g. the technology and the administrative organization) that had been built up over time by the ECB and the national central banks.

However, there are also risks: reputational risks if supervisory failures adversely affect the reputation of the central bank and thus the credibility of monetary policy, or potential conflicts of interest between monetary policy and supervisory decisions.

Based on the experience of my participation to the meetings of both the Supervisory Board of the SSM and the Governing Council of the ECB, I believe that the current architecture of the SSM – especially the “separation principle” – strikes an adequate balance and provides for appropriate safeguards to minimize these risks. I refer for example to procedural rules and safeguards such as functional separation of the workforce, the “need to know” framework for information sharing as well as decision-making processes that are differentiated, take place in separate moments and need to be rigorously motivated. The “no-objection” framework is also crucial.

The European Parliament monitors the functioning of the SSM, and the Commission  reviews the functioning of the SSM Regulation, including the application of the separation principle, every three years. I would keep an open mind when assessing whether we need a change of the current arrangements. So far the separation principle seems to have worked well, but as the financial sector evolves and the European construction is developed, a different setup might address better the separate but related goals of price stability, financial stability and the safety and soundness of the banking system. 


33. What is your view on the current institutional set-up of the ESRB under the roof of the ECB with regard to its concrete achievements in macro-prudential oversight?  

The ESRB was an important component of the European reaction to the great financial crisis. Over the past years, the institution has shown its usefulness in comprehensively monitoring financial stability risks in the EU. The warnings and recommendations issues by the ESRB have spurred the design and implementation of macro-prudential policy frameworks in the EU. For example, its timely detection of emerging real estate risks provided the basis for targeted measures by national macro-prudential authorities.

The success of the ESRB relies on its ability to analyse in a timely fashion highly granular information on the state of the European economy and financial sector. The ECB provides an essential contribution as supporting institution, by allowing the ESRB to leverage on its expertise, technological and administrative infrastructure, highly qualified staff. To the extent that the financial sector is rapidly evolving from a bank-centric to a more diversified ecosystem, the cross-sectoral mission of the ESRB will become more important. In such a world a broader base of expertise within the European System of Financial Supervision will be needed.

From an institutional perspective, the EU legislators provided a clear governance structure that allows the ESRB to reap the benefits of the ECB expertise, while ensuring adequate separation and independence of the decision-making procedures and bodies of the ESRB (the ECB’s President chairs the General Board in the interest of the institution, the ECB representative is the Vice-President).


34. How can we address the high levels of the stock of non-performing loans as well as the risks in the flow of non-performing loans? How do you assess the problem of non-performing loans in the balance sheets of medium and small credit institutions? How do you see the ECB’s/the SSM’s role in addressing this issue?

The ECB took over European banking supervision at a critical juncture. The sovereign debt crisis had run its course but, as usual, it effect were materializing with a lag. The level of non-performing loans reached in 2015, almost €1 trillion for significant institutions (SIs), in terms of gross book value. Since then this amount has essentially halved (€560 billion). The gross NPL ratio dropped from 8% to less than 4% in the same period, below the 5% threshold defined by the EBA.

The work of the ECB has been pivotal in bringing about this improvement, by making the issue of NPLs a priority from day one. Clear qualitative and quantitative expectations were set about how banks should deal with NPLs. In addition, the EU Parliament has recently approved a regulation on “calendar provisioning” (the so-called Pillar 1 backstop in the revised CRR to ensure adequate provisioning levels for new NPLs) that is probably the toughest in the world. These policies have been heeded by banks: NPLs have been sold, workout units have been established or improved, recovery rates have been increasing. The statistics that I have quoted above are a good summary indicator of the progress achieved.

The NPL ratio is still above pre-crisis levels and pockets of vulnerabilities remain in some countries. Thus, it is important that efforts continue to further reduce the level of NPLs. However, as mentioned in the past, I believe that NPLs should be reduced “as fast as possible, but not faster”. Exceeding the speed limit could entail risks for banks, which would be forced to fire-sell NPLs in secondary markets for such instruments that in a number of countries are still illiquid, opaque and oligopolistic.

The reduction in NPLs must be part of a broader effort by supervisory authorities to reduce all bank risks, including those related to money laundering, operational risks, market risks, cyber risks; these risks are considered in the annual risk assessment exercise of supervised banks by the SSM (the so called SREP).

But in my view, the key illness of the European banking sector is low profitability, which cannot be cured through risk reduction policies alone.

Concerning the flow of NPLs, the EBA has recently issued guidelines on credit origination that should help improve the quality of new lending, and therefore reduce the inflow of new NPLs in the future. So my answer to the first question is that we have indeed largely addressed the problems related to NPLs.

I would argue that the same holds true for less significant institutions (LSIs). While these banks are not directly supervised by the ECB, they are subject to the EBA guidelines on NPLs (that were drafted after the ECB NPL guidance for SIs, and closely mirror it) and to the “calendar provisioning” mechanism. As I said we have now NPL policies for all banks, including LSIs. The fruits of the work done are clearly visible, and we should continue to forge ahead in this effort until the problem is addressed.

To conclude, let me mention that the need to strengthen the banking system and to reduce NPLs was especially pronounced in Italy, after the financial crisis and the double dip recession that has hit the Italian economy. The Bank of Italy has played a key role, within the SSM, in pushing banks to reduce NPLs at a high but sustainable speed and to strengthen their capital position. Italy is the country for which improvements in banks’ balance sheets have been among the most remarkable: in spite of the moderate economic recovery experienced in recent years, the annual flow of new NPLs is now lower than it was before the financial crisis (around 1 per cent). The stock of net NPLs (i.e. NPLs net of provisions) has also declined considerably; it is now at 4,0 percent of total loans, well below half of the peak figure of 2015.


35. How do you assess the high level of level 2 and level 3 assets in many bank balance sheets? Are these assets properly taken into account by the current supervisory framework?

In the accounting jargon, Level 3 instruments represents a category of both financial assets and financial liabilities which are difficult to value due to lack of observable information on the parameters needed for their pricing. Level 2 assets and liabilities are relatively comparatively easier to price but they also lack quoted prices.

In Q2 2019 the accounting value of Level 3 assets of SSM banks reached €194 billion, while the value of Level 2 assets stood at €3,174 billion. These values represent 0.86% and 14.01% of total banking assets respectively. The SSM banks also hold similar values of Level 3 and Level 2 liabilities. This is important to underline, because the risks generated by these instruments (assets and liabilities) do not necessarily (and generally do not) net out.

The classification of instruments as Level 2 or Level 3 provides an indication of complexity but it does not mean that they are toxic or non-performing. Moreover, Level 2 and Level 3 assets and liabilities are useful instruments for banks’ customers, that use them to hedge risks that would otherwise adversely affect their activity and thus the real economy.


However these instruments can pose valuation risk. This may be due to insufficient information (accounting, prudential and market data); to weaknesses in the models used to price these instruments; to the discretion given to banks to classify these instruments under the accounting and prudential regulations (banks have obvious incentives to use this discretion to their advantage). Overall, these facts make it difficult to obtain a complete and reliable assessment of the risks embedded in these complex bespoke products. For these reasons, the SSM closely monitors banks’ exposures to Level 2 and Level 3 instruments and has reinforced its supervisory scrutiny on them. In this respect, I welcome the fact that trading risk and asset valuation continues to be a supervisory priority for the SSM in 2020, including through tailored on-site missions.


36. What are your views on the regulation of shadow banking entities? Do you see regulatory and supervisory loopholes that should be addressed by legislators in the short term?


Diversifying firms’ funding sources makes corporates more removed from shocks originating from the banking sector. As such, a larger share of market-based finance can help the real economy as well. On the other hand, SMEs and households, which represent a large share of borrowers, are a natural fit for banks. We need therefore to make sure that both banks and non-banks evolve in an environment in which financial stability and individual customers are both adequately protected. 

We should also be mindful that, in the euro area, a large share of investment funds is owned by banks and insurance companies. Supervision should prevent the possibility that turmoil in the investment fund sector might spill-over to the parent companies. At the same time, consumer protection and supervision authorities should ensure that parent companies do not interfere with the allocation of savings by the investment funds they control. 

So it is important to keep closely monitoring possible risks emerging from this shift towards non-banks. In particular, it is important to carefully monitor the levels and dynamics of leverage and liquidity in the non-bank financial sector, and to continuously assess pro-cyclicality and interconnectedness of the financial system at large. In my view, we should carefully reflect on whether we have sufficient information for non-banks and whether there are gaps in the regulatory framework to address risks both at the micro- as well as the macro-prudential level. One might want to consider whether sound governance principles should be defined, in order to ensure that market participants do not have incentives to take excessive risks.


37. What are your views on the steps towards the completion of the Banking Union with a European Deposit Guarantee Scheme and a fiscal backstop, including the necessary implementation of existing Banking Union legislation?

I believe that a European Deposit Insurance Scheme (EDIS) is necessary to complement the other two existing pillars of the banking union and strengthen the European financial architecture. The discussions on EDIS have been unsuccessful for many years, and I strongly welcome the momentum that seems to emerge on a concrete roadmap to establish a truly European deposit insurance scheme. Such a roadmap should also include, as a longer term objective, the creation of a public backstop for EDIS (as it is now being established for the Single Resolution Fund).

Progress in this field should be made in parallel with the implementation of the risk reduction measures set in the Banking Union Legislation for legacy assets (such as NPEs) and buffers of easily bail-inable liabilities (MREL), to be achieved at an ambitious but realistic pace. Such an approach acknowledges that risk reduction and risk sharing are mutually reinforcing goals, and should therefore go hand in hand: the pooling of risks increases sustainability for all. We should also use this opportunity to tackle issues that have remained insufficiently addressed so far.

In my view, one of the key priorities is a revision of the crisis management framework to allow banks of all sizes to exit the market without taking recourse to taxpayer’s money, but also without destabilising the financial system in the Member States. Based on the current EU legal framework, for a bank crisis to be managed via the resolution regime the bank must pass the ‘public interest test’ by the Single Resolution Board. This implies that in the euro area resolution is only available to fewer than 100 out of a total of about 3,000 banks. The crisis of the remaining 2,900 banks must be handled through national insolvency proceedings, similar to those used for non-financial firms. As I mentioned in the past, I believe that the model of the US Federal Deposit Insurance Corporation (FDIC) represents a valuable benchmark for the EU in this matter.


We should also consider how to stimulate the cross-border integration of retail banking markets groups. This may require improving the cooperation and trust between authorities and removing obstacles to cross-border mergers.



38. What risks related to leveraged loans do you see for financial stability and how should they be addressed?

Leveraged loans carry  high credit risk because they are extended to highly indebted borrowers. Leveraged lending has been increasing in the last years, especially in the US, due to low interest rates and investors’ search for yield. The 18 most active banks in the market, which are supervised by the ECB, had exposures of more than €300 billion at end-2018. This is a relatively low fraction of their loan books, although high in absolute level.

The SSM has issued a Guidance on leveraged lending already in 2017 in order to ensure that banks pay sufficient attention to and provision adequately for such risky exposures. Leveraged finance will be addressed by the SSM within the 2020 supervisory priorities, which include dedicated on-site inspections.

In addition to bank-level risks, leveraged loans could generate potential systemic risks due to the high degree of interconnectedness across investors in this market (due, for example, to indirect exposures through various channels). Thus, I fully support the ongoing initiatives by the FSB to monitor risks to financial stability stemming from leveraged lending. I would be in favour of an international effort to mitigate such risks, at least by issuing common guiding principles.


39. Which challenges would you foresee for the ECB if the European Stability Mechanism (ESM) was to be transformed into a European Monetary Fund (EMF)? Which role do you attribute to financial market discipline in pricing sovereigns?  

Prudent and sound fiscal policies are necessary to make sure that national governments have adequate fiscal space to respond to economic downturns. Financial markets have an important role to play in pricing risks, but their signals might either be too slow and weak or too sudden and disruptive. Thus, the stability of the euro area requires a fiscal governance framework designed to prevent the build up of fiscal imbalances as well as an effective crisis management framework.

The European Stability Mechanism (ESM) played a key role in the euro area’s response to the sovereign debt crisis. ESM tools, procedures and programs are already akin to those of the IMF. However, the ESM has no “monetary function” and calling it a “European Monetary Fund” should be avoided, as it would be misleading and would not reflect appropriately the ESM role and functioning.

While the ESM was capable to deliver on its mandate, the reform currently under discussion reviews its role and toolkit, for instance in relation to the possibility to provide precautionary credit lines (that have never been used so far). Moreover, the ESM reform will make available a backstop to the Single Resolution Fund, thus contributing to make progress in the direction of completing the banking union. A positive decision on the ESM reform in December 2019 would thus represent a welcome step forward.

The new ESM Treaty foresees that, in performing its role, the ESM should respect the powers attributed by EU law to the Union institutions and bodies, including the ECB. Consistent with this aim, I would consider a reasonable next move to integrate the ESM into the EU legal framework and make it accountable to the European Parliament.

40. What is your assessment of the involvement of the ECB in the context of financial assistance programmes? How do you see evolving in future a potential ECB involvement in financial assistance programmes and in post-programme surveillance?

When the ECB was asked by Member States - and subsequently by legislators – to provide its expertise to the financial assistance programmes, the euro area was in exceptional circumstances, as it was building the institutions needed in the process and, at the same time, it was facing a major crisis. In such a critical situation it was decided to join forces and complement the expertise of the Commission.

The ESM Treaty and the Two-Pack Regulation called the ECB to contribute as an advisor to the tasks of the Commission in particular by: (i) assessing the sustainability of public debts; (ii) negotiating an MoU; and (iii) monitoring respect of the conditionality attached to the financial assistance package.

At the same time, the ECB was not formally involved in the decision-making process for actions and decisions in the programme context and did not subscribe the Memoranda of Understanding.

Over time, the ECB has increasingly narrowed the focus of its contribution onto macro-critical issues and financial sector dossiers. This allowed the ECB to use its expertise at best and focus on financial sector issues in programme countries, thereby facilitating the conduct of monetary policy.

By participating to post-programme surveillance – as also foreseen by the EU legislation – the ECB can adequately assess implications for its tasks and to offer its know-how to the benefit of all the stakeholders.


41. How do you assess the implementation of the bank resolution mechanism in the EU? What are your views on ‘too-big or interconnected to fail’ institutions, savings and cooperative banks, and the overall issue of the profitability of the banking sector in the EU, and what is your view on the way forward for its architecture in order to fulfil the needs of the real economy and long term financing?

Protecting taxpayers from the cost of banking crises, while preserving financial stability, was a crucial objective of the creation of the European resolution framework and should not be now put into question.

While the framework became operational in 2016, it has not yet been tested to its full extent. For example, a complex case of bank resolution has not been seen yet; nor have we been able to gauge the effectiveness of the MREL cushion to ensure the stability of a systemic bank. Likewise, the use of the Single Resolution Fund remains untested.

Based on my past experience, I believe we must carefully reflect how we could design a system that allows banks of all sizes to exit the market even in challenging situations (e.g. when a buyer for the bank under resolution/liquidation is not available) without using taxpayer’s money but also without endangering financial stability. As I mentioned in my answer to question no. 37, the US Federal Deposit Insurance Corporation (FDIC) could represent a valuable role model on this matter.

On the issue of the too-big-to-fail, I support the work of the FSB in order to contain the probability and consequences of the default of systemic financial institutions. I believe that the accumulation of additional capital buffers as well as larger loss-absorbing capacity for systemically important banks usefully contribute to address the problem.

At the same time, I think that more should be done to preserve the diversification of the banking system, finding ways, to the extent possible, to reduce the risk of disappearance of small and medium size banks, which play an important role in the euro area, where SMEs represent an important component of the real economy and employment.

I believe that low bank profitability is currently the most important problem for the European banking sector from both a supervisory and a financial stability perspective. Unfortunately, there is no silver bullet on this issue. The solution will require adjustment on several fronts.

Excess capacity will have to be absorbed. M&A operations are an important tool to this end; unfortunately, these operations are hindered by various factors, including the incompleteness of the Banking Union. Thus, an ambitious approach to completing the Banking Union and making real progress on the Capital Markets Union would send an important signal to the public and markets that Europe can deliver a more resilient, more integrated and overall better framework for providing finance to the real economy.

Banks also need to expand their investments in digitalisation in order to supply a broader set of products, generate sustainable income and to contain their cost/income ratio over the medium term.

The quality of management and governance is also key. Work by SSM indicates that banks with good management and sound governance obtain on average higher profitability. It also shows that profitable banks can be found in all classes of business models and in most countries.  


42. How could money laundering, tax avoidance and terrorist financing be addressed more effectively across the Banking Union? How should money laundering risks be taken into consideration when the ECB assesses banks financial stability? Is there a need to centralise anti-money laundering (AML) supervision in a single EU agency or mechanism?  


Recent episodes show that involvement in money laundering or terrorist financing can pose significant risks to banks and even threaten their viability. For this reason, many initiatives have been and are being taken at European level to ensure a stronger regulatory framework, more effective AML oversight, better coordination between AML authorities and prudential supervisors. The Council, the Commission, the Parliament, the EBA and the SSM – as well as national Authorities – are all engaged to achieve these important goals.

As a banking supervisor, it’s crucial for the ECB to continue improving its ability to assess the prudential implications for institutions of ML and FT risk. In fact, ML/TF misconduct is one of the key risk drivers that have been identified in the SSM supervisory priorities for 2020. Work is ongoing on different areas to enable the ECB to better understand and identify this risk when carrying out its supervisory activities, including when authorizing institutions or assessing proposed acquisitions of qualified holdings and in the ongoing supervision, including in the SREP process. A closer look at the link between ML/TF risk and institutions’ governance and internal controls, business models and profitability, liquidity and operational risk is indeed quite relevant.

Another important area is information sharing and cooperation with AML/CFT Authorities: since AML oversight falls outside the ECB remit, it is crucial for the ECB (and the NCAs) to receive and provide all the relevant information on ML/FT risks and regulatory non-compliance that national Authorities might have detected. To facilitate and enhance the exchange of information, cooperation agreements between the ECB and the national AML authorities have been recently signed. I strongly welcome this outcome.

Looking ahead, I think that a more centralized and homogeneous European approach on AML is necessary. First, because ML is often a cross border phenomenon, so it is as effective as its weakest component. Second, because a European approach would simplify the process and make it more efficient. 

A first step has been taken in the recent ESA review package, where the role of the EBA on AML/CFT issues has been strengthened. Starting from January 2020, the EBA will be in charge of new important tasks, such as: monitoring the quality of national AML supervision; giving impulse to their supervisory action, where it has indications of material breaches of AML rules; collecting and centrally storing information on material weaknesses that might be important for AML purposes for both prudential and AML authorities; facilitating cooperation with non-EU countries supervisory Authorities on ML/TF cross-border cases. 

Proposals on how to develop further the AML/CFT framework in the EU are now under discussion; I strongly support them. The necessary improvements include: (i) a higher degree of harmonization of AML regulation: transforming parts of the V AML Directive into a directly applicable and uniform Regulation would be a welcome development; (ii) the convergence of AML/CTF supervisory practices on high quality standards; and (iii) the establishment of a new European authority in charge of AML supervision at the EU level.

All in all, strengthening the fight against money laundering and terrorist financing is crucial for safeguarding the integrity of the European banking and financial market. ML/TF can have a significant, adverse impact on an institution’s safety and soundness, as recent cases have shown. Progress in this field should be achieved as rapidly as possible.


43. Do you think that non-euro area Member States should fulfil additional conditions before becoming members of the euro area and thereby members of the Banking Union, such as controlling money laundering risks effectively, demonstrating comparably stable property markets, controlling corruption effectively?


The progress of each non-euro area country’s toward the Maastricht parameters, together with the sustainability of the convergence, is regularly assessed by the ECB and the Commission in a specific Convergence Reports. In the framework of Maastricht convergence, money laundering and corruption and house price developments are already part of the additional requirement of market integration. The rationale for this is that criminal activities, such as money laundering and corruption, may undermine the level playing field, and consequently weigh on potential growth, while house price bubbles could lead to macroeconomic imbalances and threaten financial stability.

In November 2014 the SSM became responsible for banking supervision in the euro area. Hence, euro adoption now also requires participation in the SSM. This is no easy task and consequently Member States approaching adoption of the euro also join the Banking Union, through a so-called close cooperation between the ECB and the national competent authority. This may require specific reform commitments.

Joining the banking union requires an assessment of compatibility of the national legal framework to guarantee that the ECB can exercise its supervisory tasks, and a comprehensive assessment of the banks to be supervised by the ECB.

Further, open dialogue between all stakeholders could contribute, for example, to remove other potential obstacles to effective supervision and to address other potential weaknesses of the national framework which may be related to prudential supervision, for instance including potential weaknesses in anti-money laundering.


44. Is deeper financial integration always consistent with the objective of financial stability? Do you believe potential cross-border bank mergers reinforce the too-big-too-fail problem? What should be the goals of the Capital Markets Union (CMU)?

Attaining a higher level of financial integration and a more efficient functioning of the European financial system is highly relevant to the ECB’s tasks. First, financial integration is a prerequisite for a smooth transmission of the ECB’s monetary policy throughout the eurozone. Also, more integrated banking sectors with a higher presence of non-domestic institutions reduces risks from the bank-sovereign nexus. Second, it contributes to the Eurosystem's goal of an orderly payment system in the eurozone. Third, thanks to financial integration a more efficient allocation of resources increases the growth potential of the euro area economy. Finally, risk diversification enhances the resilience and stability of the financial system.

At the same time, during the crisis we saw that in a highly financially integrated market risk spreads very quickly and transmits financial fragilities. This, in turn, increases the likelihood of a systemic crisis.

What we learned from the crisis is that it is necessary to manage this trade-off by designing an appropriate framework for financial regulation and effective supervision.

In this respect, the capital markets union (CMU) is a central initiative to catalyse financial integration and development in Europe. When it will be effectively implemented, the CMU will significantly deepen financial integration and make the Economic and Monetary Union stronger. This, in turn, will support the ECB’s tasks by allowing a smoother and more homogenous transmission of monetary policy. A CMU would also improve the resilience of the financial system by diversifying it, reducing the role of banks and encouraging the emergence of alternative sources of finance. Finally, completing the CMU is a necessary condition to improve private risk sharing and the resilience of the euro area economy to adverse real and financial shocks.

To achieve these goals, it is important to set an ambitious CMU agenda. We already made some progress, nevertheless more is needed. This includes complementing a single rulebook for EU capital markets with strengthened supervisory convergence, as well as improving tax and insolvency legislation by addressing shortcomings and reducing heterogeneity across countries.

The Banking Union is another European way to achieve higher integration and greater financial stability. Allocating supervision and the resolution of banks to the European level clears the way for true integration in European banking market but at the same time facilitates the management of potential cross-border banking crisis.  Moreover, the Banking Union will reduce concerns of too-big-to-fail banks and the relative weight of national champions. Going forward, the challenge will be to foster efficiency by enhancing cross-border mergers.

45. A number of significant private and public sector bonds in Europe are characterised by negative yields. Does this have any financial stability implications and if so how should they be addressed?

The available evidence suggests that so far the low interest rates environment has had significant expansionary effects and that the impact on euro-area average banks’ profits has been, if anything, slightly positive. While the narrowing of the net interest margin has certainly eroded some revenues, the improvements in economic activity have led to enhanced lending, higher asset valuations and lower loan loss provisions.

The impact on insurers and pension funds might have been more pronounced, as in some countries these entities often sold life insurance products and defined-benefit schemes with generous guarantees in the past. In a low or negative interest rates environment, then, they can have difficulties in generating returns sufficiently high for them to be able to meet their obligations. Furthermore, when market rates decline, the net present value of both assets and liabilities increases. But in most cases the net effect (decline in assets minus the decline in liabilities) is negative, because liabilities tend to have a longer maturity than assets (this is the so called ‘negative duration gap’).

For intermediaries and investors, a strategy to deal with low interest rates is to search for yield in riskier and illiquid assets. To some extent, this is a welcome and intended outcome of monetary policy accommodation, as it helps ease financing conditions, in particular for non-financial corporations. But this trend also contributes to building up financial stability risks and vulnerabilities, which are best addressed, by the targeted application, when needed, of macro-prudential tools, especially when the imbalances are at the national or sectoral level. Looking forward, then, the ECB will need to continue monitoring the impact of these developments, as the effects of a reduction in official rates to negative values – the truly “unconventional” instrument among those introduced so far by the Governing Council – are surrounded by uncertainty.


46. What are your views on the current ECB policies with regard to the prevention of conflicts of interest within the ECB? Are any changes necessary?

Over the years the ECB has periodically reviewed and strengthened its ethical standards and rules at all levels, i.e. those regarding its decision making bodies (Governing Council and Executive Board) and the ECB staff. The Governing Council has also defined common rules for a Eurosystem and a SSM ethics framework. In this vein, the ECB has recently adopted a Single Code of Conduct that establishes the same level of ethical standards for the members of the Governing Council, Executive Board and Supervisory Board.

When I was member of the Supervisory Board of the ECB and Alternate member of the Governing Council, I signed off this Code of Conduct. As a result, my monthly calendar has been published on the Bank of Italy’s website, listing meetings specifically related to my role in the high-level ECB bodies. The calendars include information on the date, name of participants/organisers, topic and location of the meeting/event. Moreover, as reported in my answer no. 2, I am also subject to the Code of Conduct of the Bank of Italy (as well as the Code of Conduct of IVASS, Italy’s Insurance Supervisory Authority) on matters such as conflicts of interest, confidentiality, external mandates, policy on acceptance of gifts and other benefits, and financial investments in compliance with the Bank’s core values: independence, impartiality, honesty and discretion. I have always found these codes of conduct extremely important; they represented a clear and visible signal of the integrity and impartiality that guided my activity and the functioning of the Institution for which I was working.

The framework set up by the ECB aims at ensuring that the ECB, the Eurosystem and the SSM respect the highest standards of integrity. For this purpose the inputs received by the European Parliament, the European Ombusdman and other competent stakeholders such as Transparency International have always been properly assessed and taken into account.

The ECB ethics framework is subject to ongoing review in order to reflect latest developments and best practices. With specific regard to prevention of conflicts of interest, I believe that the current rules are adequate.


D. Functioning of the ECB and democratic accountability and transparency


47. What will be your personal approach of the social dialogue at the ECB?

My experience is that an open and constructive dialogue between staff and the Board is key for the efficient functioning of any institution. A happy workforce makes for a productive workplace and high quality decisions and their implementation. At the Bank of Italy there is a constant dialogue with trade unions on all matters related to the wellbeing of employees.

For instance, the management of working hours at the Bank of Italy aims at finding the right balance between greater employee satisfaction and a higher level of organizational efficiency. Employees can distribute their hours flexibly over the week in various ways (flexible starting time and lunch hour) as long as this is compatible with their work commitments.

I understand that in recent years the ECB has taken important measures to improve of the work-life balance of its staff. I would like to bring to the ECB an emphasis on working by objectives, leaving to staff flexibility on how to reach them.

Leveraging on my previous experience, I would also like to contribute to building a stronger culture of empowerment and equal opportunities regardless of gender, nationality or other distinctions. It is important that we act upon regular staff surveys through which we gather staff’s views on how to improve the work environment.


48. The European Parliament plays a major role in the accountability of the ECB. What conclusions do you draw from the comparison with other jurisdictions? (e.g. US Congress/Fed vs European Parliament/ECB vs UK Parliament/Bank of England)? What measures and future reforms would in your view reinforce the democratic accountability of the ECB towards the European Parliament?

Accountability is a cornerstone of modern central banking. A central bank needs to be independent in order to carry out effectively its mandate of price stability. From this independence however stems the obligation to explain and justify its policy decisions to citizens and their elected representatives. As such, accountability constitutes an essential foundation of the legitimacy and effectiveness of independent central banks in the pursuit of their mandate.

It is very hard to compare the accountability of central banks across jurisdictions, due to differences in institutional frameworks, central bank mandates, governance characteristics and legal foundations. The analyses of the de jure accountability of central banks do not find major differences in the degree of accountability of the ECB, the Bank of England (BoE) and the Fed as regards parliamentary exchanges. However, de facto accountability practices and how they have evolved over time is another matter.

Like the Fed and the BoE, the ECB reports to the European Parliament by means of regular public quarterly hearings in the competent committee. Moreover, unlike the Fed and BoE, which do not have this hearing, the ECB President appears in front of the plenary for the debate of the ECB’s Annual Report. In many occasions the ECON Committee has invited Executive Board members to testify on specific topics; the Vice President presents the ECB Annual Report to ECON.

The interaction between the European Parliament and the ECB’s leadership and will probably intensify over time, in line with the higher complexity of the European and global financial system and the emergence of challenges to monetary and financial stability. If appointed in the Executive Board of the ECB, I would be most pleased to engage in an open and constructive dialogue with the European Parliament.

In response to the need for closer scrutiny the ECB and the European Parliament have developed new accountability channels. The ECB publishes its answers to written questions by Members of the European Parliament and its response to the European Parliament’s resolution on the ECB Annual Report.

The ECB has also accountability arrangements in its role of banking supervisor. For example, the Chair of the Supervisory Board regularly appears in front of the European Parliament and the proceedings of the meetings of the Supervisory Board are regularly transmitted to the ECON Committee.

A similar trend has emerged in recent years in Italy. Since the start of the crisis, the Bank of Italy has strengthened its interaction with and accountability to Parliament; from 2014 to mid-2019 the members of the Board have appeared in 38 hearings. Additional exchanges took place at the technical level between the respective staff, in  order to ensure, for example, that relevant data and analyses are available.

In order to improve our communication with the public we have also engaged in an extensive programme to reach out to all areas of society. I have personally participated in meetings with peoples in various Italian cities to explain our policies and those of the Eurosystem. This has contributed to improving people’s understanding of and their trust in such policies.


49. What will the ECB concretely do to have gender-balanced shortlists for ECB top positions in the future and enhance overall more gender diversity in the ECB, given that at present only two out of 25 Members of the ECB governing council are female? How do you personally intend to improve gender balance within the ECB? When do you expect first results of your actions in this regard?

Gender balance should be an objective for the central banking community at large and for the entire profession of economists. Over the past months two women were proposed to chair and to be member of in its Executive Board – hopefully this will encourage national central banks to be bolder in their appointments of senior officials.

Given the starting conditions, a balanced gender composition in the ECB leadership requires concrete, forward-looking initiatives. In this regard, I welcome the recent initiative by the ECB to launch a Women in Economics Scholarship, as it contributes to build a pipeline, which is a necessary precondition to achieve a better gender balance. 

We should be aware that tackling the gender equality challenge is a medium-term project and that there are no shortcuts. In order to improve the gender balance we need to support women’s career development in central banking, and more broadly in the field of economics, from the beginning. This requires deploying a wide range of tools, such as: the institution of targets; measures to make the central banking environment more women friendly; a better work-life balance; proposing positive role models.

The Bank of Italy started tackling gender issues already years ago. The current Board has given impetus to this process, adopting a multi-year Strategic Plan, setting targets and creating a Diversity Manager responsible for promoting inclusion policies and to support women’s professional growth. Our internal policies increasingly aimed at ensuring gender parity at all levels. The introduction of a wide set of smart working possibilities and the availability of child care structures contributed to ensuring work-life balance especially, but not only, for women; the introduction of mentorship programs, a balanced gender composition of advancements panels, the introduction of targets for managerial roles contributed to reduce implicit discrimination. 

The results of these policies are tangible: 30 percent of the managers are now women, up from half that much only a few years ago; we are ahead of our target which is to reach 35 percent by 2022 and we will keep improving thereafter (for Italy’s insurance supervision authority, of which I am the chair, the share of women in managerial positions is 50 percent).


We have done in-depth analyses of gender issues. In 2012 we undertook – and subsequently published – a wide research project, measuring the gender gap in the Italian economy; exploring the benefits of diversity, at both the micro-level (e.g., on companies’ governance, on some aspects of banks’ performance) and the macro-level (e.g., the impact on GDP of greater female participation in the labor market); identifying the obstacles to gender parity in the Italian economy (e.g., work-life balance issues, implicit discrimination, cultural factors). The research has contributed significantly to the Italian debate on policy responses.

My understanding is that the ECB has been working on gender issues over the past years, and I would fully support further developments, from improving the internal and external pipeline to giving women more opportunities with the many delicate and highly complex tasks performed in a central bank: the ECB should consider a strategic priority attracting and developing female talent at all levels.

Finally, the ECB should also foster more generally diversity of thought. In a world that is diverse and deeply inter-connected, research shows that diverse teams and inclusive behaviour enable organisations to achieve better performance. Diverse teams are more resilient in avoiding group-think and have proved to be better at robust decision-making processes.


50. How do you see possible improvements for the ECB’s accountability vis-à-vis the European Court of Auditors (ECA) in terms of its operational efficiency? Where do you draw the line for the ECA’s mandate?

The European Court of Auditors (ECA) carries out a very important role for the ECB as foreseen in the EU Treaties and in particular in Article 27.2 of the Statute of the ESCB and of the ECB. The independent assessment of operational efficiency of the management of the ECB greatly contributes to the delivery of the ECB mandate. Therefore the ECB should continue to support the work of the ECA, in particular by providing complete access to all documents required for the performance of its tasks.

At the same time, the ECA should be aware of the limits of its role and respect the prerogatives of the ECB when taking independent decisions on its own tasks. 


51. Do you think the ECB should apply the standards of the new Directive on the protection of persons reporting on breaches of Union law internally? When do you expect the ECB to establish specific procedures for protecting whistle-blowers?  

Sound whistle-blowing arrangements, i.e. proper reporting channels and protection of whistle-blowers, help to support the integrity of and trust in an institution. Therefore the ECB as a public institution should attach great importance to the adequacy of the arrangements in this area. Moreover whistle-blowing arrangements are vital from both a risk management and working culture perspective. By way of its Guidelines on the ethics framework, the ECB has also requested the Eurosystem NCBs and the SSM NCAs to adopt rules and procedures on whistle-blowing in accordance with the applicable laws and regulations. 

At the Bank of Italy, we have set up a webpage where employees and consultants of intermediaries supervised by the Bank of Italy or other individuals can report regulatory violations or management misconduct by following a few simple rules. The Bank of Italy guarantees the confidentiality of the whistleblower's personal data, also to protect them from any possible reprisals. A similar procedure, based on a different channel, allows employees and consultants of the Bank of Italy to signal irregularities and misconduct committed either by their colleagues or by their managers.

The new “Whistle-blower Directive”, alongside best practices, policies and processes of other institutions represent a benchmark for the ECB in the enhancement of its whistleblowing framework. This is a priority of the ECB’s Executive Board which I fully support. 

52. What do you think about the fact that the Council in the past once ignored the opinion of the European Parliament regarding the appointment of a member of the Executive Board of the ECB? Will you accept your appointment as ECB President if the European Parliament were to vote against it?


Scrutiny by the European Parliament provides a bedrock of accountability, and accountability – together with independence – is essential to the ECB’s effectiveness and legitimacy. For these reasons, I look forward to the cooperation I will have with MEPs in the ECON Committee. I attach very high value to the opinion of the European Parliament as part of the appointment process and I hope that this will lie the foundation for a frank and trustful relation over the years to come.

It is not my role, however, to discuss the respective roles and competences of the Council and Parliament in EU law regarding the appointment framework. I trust that the two Institutions can agree on the best way forward in the interest of the European Union.  

53. Do you think it would be appropriate for you or other senior ECB staff to participate in the 'Group of Thirty' of central bankers and financial industry leaders or similar groups or associations?  

As pointed out in my answer no. 46, all Executive Board members and staff adhere to the strict transparency, ethical and governance standards defined by the ECB. At the same time, it is important that they have regular and open interactions with a wide range of stakeholders from both the public and the private sector. This would allow them to acquire relevant information on key economic and financial developments.

I have no private information on The Group of Thirty. According to its website, its membership includes senior central bankers and highly respected academics, and there is currently no ECB member. The issue was raised in the past in this Parliament. I would need to see in the future what your attitude is on this important governance issue.

The Single Code of Conduct approved by the ECB in 2019 has introduced specific rules on relations with interest groups in order to avoid potential conflicts of interest and the possibility of misunderstandings. Executive Board members must, in particular in their interactions with interest groups, be mindful of their independence and their professional confidentiality obligations. Moreover, the key principles for external communication defined by the ECB foresee specific rules on how to interact with representatives from the private sector, academia, interest groups, associations and civil society.

I think that this framework is serving well the ECB and provides a good balance between the values and duties of the institution and the need to establish contacts with private sector counterparties. I would welcome your input if you think that this balance needs to be adjusted.


54. In the past, the ECB has launched initiatives such as AnaCredit and the European Distribution of Debt Initiative (EDDI), which have not been at the core of the ECB’s mandate. How do you see the ECB’s role in such initiatives and where do you draw the line with regards to the legislator’s prerogatives?

The Treaty and the Statute of the ESCB assign a clear mandate regarding financial market infrastructures to the ECB and the Eurosystem. Moreover, the ECB has a key interest in obtaining all necessary data to support and thus best fulfil its tasks, as spelled out in the Treaty. In this respect, Article 5 of the ESCB and ECB Statute requires the ECB – in cooperation with National Central Banks – to collect all statistical information that is necessary to duly perform these tasks. Hence, both the ECB’s legal mandate and specific statutory requirements allow for the possibility that the ECB may undertake regulatory initiatives in specific areas, such as credit statistics and payment systems.

In order to carry out their tasks, Eurosystem central banks must have access to high-quality data on the euro area economy and financial markets. However, aggregate data do not always provide an accurate description of the underlying developments, as they may average out heterogeneous, yet potentially informative, country-specific, sectoral and/or firm-level trends. For this reason, the aggregate picture can sometimes be misleading and incorrectly inform the decision-making process. This aspect has become all the more evident since the outbreak of the global crisis, which demonstrated that taking granularity into account in the Eurosystem’s economic and monetary analyses may be extremely useful for both monetary policymaking and surveillance purposes.

The AnaCredit initiative involves processing highly granular credit data, which provides useful insights into the complexity and interconnectedness of the euro area economies and financial markets, and hence could lead to more informed and effective policy decisions in the future.

These statistical initiatives need to fully take into account both EU legislation and the burden on the reporting agents. Concerning the first aspect, close and continuous cooperation between the ECB and Eurostat is necessary. This cooperation has thus far facilitated an efficient division of labour between the two institutions, avoiding inefficient overlaps or data gaps. Concerning the second aspect, I believe that the ECB should continue its fruitful practice of holding public consultations on its regulations concerning European statistics, which give citizens, market participants and other stakeholders the opportunity to express their views.

Finally, as mentioned in previous answers, the ECB and the Eurosystem have also a clear mandate in the Treaty relative to payment systems. This allows for the possibility of undertaking regulatory initiatives in payment systems, as well as for acting as a catalyst for change. One aim is to further develop harmonised standards, rules and processes. For this reason, the ECB is currently exploring – through the EDDI (European Distribution of Debt Instruments) project – the possibility of supporting a harmonised issuance and distribution of euro debt instruments in the EU. On 22 May 2019 the ECB launched a market consultation inviting intermediaries and other stakeholders to provide their feedback on the project, in particular on the role that the Eurosystem could play in it. In determining its follow-up actions it is indeed important that the ECB – in line with its mandate – duly considers the feedback from the market consultation, in order to assess if – and to what extent – the project would meet the interest of the private sector.





Appointment of a Member of the Executive Board of the European Central Bank


12451/2019 – C9-0149/2019 – 2019/0817(NLE)

Date of consultation / request for consent





Committee responsible

 Date announced in plenary







 Date appointed

Irene Tinagli





Discussed in committee





Date adopted





Result of final vote







Members present for the final vote

Gunnar Beck, Marek Belka, Stefan Berger, Gilles Boyer, Cristian-Silviu Buşoi, Derk Jan Eppink, Engin Eroglu, Markus Ferber, Jonás Fernández, Raffaele Fitto, Frances Fitzgerald, Luis Garicano, Valentino Grant, José Gusmão, Danuta Maria Hübner, Stasys Jakeliūnas, Othmar Karas, Billy Kelleher, Ondřej Kovařík, Philippe Lamberts, Aušra Maldeikienė, Jörg Meuthen, Csaba Molnár, Luděk Niedermayer, Dimitrios Papadimoulis, Piernicola Pedicini, Lídia Pereira, Jake Pugh, Evelyn Regner, Antonio Maria Rinaldi, Robert Rowland, Martin Schirdewan, Pedro Silva Pereira, Paul Tang, Irene Tinagli, Inese Vaidere, Johan Van Overtveldt, Stéphanie Yon-Courtin, Marco Zanni

Substitutes present for the final vote

Carmen Avram, Gabriele Bischoff, Damien Carême, Fabio Massimo Castaldo, Richard Corbett, Eugen Jurzyca, Pedro Marques, Fulvio Martusciello, Ville Niinistö, Stéphane Séjourné, Monica Semedo, Antonio Tajani, Julie Ward

Substitutes under Rule 209(7) present for the final vote

Rosa D’Amato, Anna Deparnay-Grunenberg, Agnès Evren, Dino Giarrusso, Enikő Győri

Date tabled




Last updated: 9 December 2019
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