 Dear colleagues, please, thank you the press, but now I would ask you please to let us start our meeting first with the adoption of our agenda, which I consider adopted, thank you, and welcoming European Central Bank President Mario Draghi for being here for the second Monetary Dialogue of the Year. The previous one, as you remember, took place on 6 February, and this one today will be followed also by a hearing with Mario Draghi in his capacity of chair of the European Systemic Risk Board. As we all know, since the last Monetary Dialogue, the ECB Monetary Stance has remained unchanged. Also relating to non-standard monetary policy measures, we all know that the Governing Council has confirmed that those measures are intended to run until the end of the year or beyond if necessary. And in any case, until a sustained adjustment of the path of inflation that will take place, and also that the Governing Council stands ready to increase if the asset purchase programme, if the outlook becomes less favourable. So with this decision, the ECB confirms that it will not let the moderate but firm recovery of the euro economy be put at risk and confirms that it is equipped with necessary ammunitions to respond to any economic, political or geopolitical contingency. Until now, the ECB unconventional policies have played a crucial role in repairing the monetary policy transmission channels and in supporting domestic demand and have decidedly helped delivering across the euro area both private and public. We are already seeing the results of this policy which should in due course lead to inflation evolving towards the ECB inflation target. President Draghi will present the ECB perspective on economic and monetary developments and discuss on the consequences of Brexit for euro-euro financial stability. The discussion with members will also cover two topics selected by the ECON Committee coordinators in preparation for this monetary dialogue, namely the issue of financial innovation and the implication for monetary policy and the question whether the rising of long-term interest rates did or did not overshoot. We have done some preparatory work on these two items with the contribution of distinguished scholars as usual. And as regards the second topic, the papers outline that the observed rise since August 2016 of the long-term interest rates is attributed to on the one hand the increase in the U.S. long-term interest rates after the reversal in the Fed's monetary stance and on the other hand on political tensions across Europe which generated higher perceived political risk. While the former factor might continue to draft the euro-euro interest rate up, the second one might recede with the result of the next elections and the one we just had. Moreover, one of the papers outlined that pulling the plug on QE too soon might undo some of the benefits of QE in the periphery countries and might lead to increases in refinances caused by member states with little or no fiscal space. So we have a lot of interesting topics to discuss and we have a lot of expectations as to your presentation, President Draghi. I give you the floor. Thank you, Mr. Chairman. Mr. Chairman, honorable members of the Economic and Monetary Affairs Committee, ladies and gentlemen. It's a pleasure to be back speaking to your committee for the second regular hearing of this year. I'm also pleased that you have chosen as the topic for today's hearing the role of financial innovation. This is only one element in the broader process of innovation which is taking place in the economy. But it is a decisive one given the essential role played by financial markets in resource allocation. Before addressing this topic, let me first review the economic outlook and discuss the monetary policy stance. The economic upswing is becoming increasingly solid and continues to broaden across sectors and countries. Real GDP in the Euro area has expanded for 16 consecutive quarters growing by 1.7% year on year during the first quarter of 2017. Unemployment has fallen to its lowest level since 2009. Consumer and business sentiment has risen to a six years high supporting expectations over further strengthening of growth in the coming months. Downside risks to the growth outlook are further diminishing and some of the tail risks we were facing at the end of last year have receded measurably. The fact that domestic consumption and investment are the main engines driving the recovery makes it more robust and resilient to downside risks, which relate predominantly to global factors. Despite a firmer recovery and looking through the volatile readings of HICP inflation over recent months, underlying inflation pressures have remained subdued. Domestic cost pressures, notably from wages, are still insufficient to support a durable and self-sustaining convergence of inflation towards our medium term objective. For domestic price pressures to strengthen, we still need very accommodative financing conditions which are themselves dependent on a fairly substantial amount of monetary accommodation. At its June monetary policy meeting, the governing council will receive an update of the staff projections and a more complete information set on which it will be able to formulate its judgment on the distribution of risks around the most likely outlook for growth and inflation. Overall, we remain firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary for the present level of underutilized resources to be reabsorbed and for inflation to return to and durably stabilize around levels close to 2% within a meaningful medium term horizon. You asked me to discuss with you today the dynamics of long-term interest rates. Over the past few decades, long-term bond yields have been trending down in both nominal and real terms. While lower nominal rates reflect monetary policy among other factors, the decline in real yields has been driven by structural factors. These factors include, notably, rising net savings as aging populations plan for retirement, relatively less public capital expenditure in the context of high public indebtedness, and has slowed down in productivity growth. If long-term real interest rates are to rise again to sustainably higher levels, it is those underlying causes that need to be addressed. And this requires structural action at national and European level. Our monetary policy for its part has been instrumental in addressing the cyclical component of the balance between the supply of savings and investment demands. And its price stability implications. By supporting nominal incomes, our monetary policy measures stimulate investment and consumption, which are preconditions for inflation to climb back to levels below but close to 2%. And a more dynamic economy over time will favor a healthy return to higher policy interest rates. Now let me move to the relevance of financial innovation. The relation between savings and investment leads me to the topic you've chosen for today's hearing. Greater financial efficiency in the Euro area is crucial in improving the allocation of capital and ensuring it is put to productive use. Innovation in financial instruments, services and infrastructure, as well as changes in the organization of financial markets, can play a useful role in this respect. Financial innovation is a continuous process. Innovations have constantly arisen in the past. Past example of innovation include the introduction of secured debt and a preferred stock, which were developed to align incentives between parties and address information asymmetries. Some innovations of the past were instead introduced to minimize transaction costs and they have become part of our everyday lives. For example, take credit cards, air or ATMs. Today FinTech, the application of new technologies to banking and financial services is a potentially transformative force. We are closely monitoring its development for several reasons. To better understand its impact, to assess the risks and to adjust the regulatory environment and supervisory approaches were needed. And also to adapt as an institution and support innovation were justified. Let me now give you some concrete examples of why FinTech is directly relevant to our tasks. A deep knowledge of the channels through which monetary policy affects the economy is of crucial importance for us. As FinTech and financial innovation more broadly have the potential to impact on the way the economy is financed, in the future they may affect the transmission mechanism of monetary policy and ultimately financing conditions. As the central bank for the Euro area, we thus remain vigilant and make sure that changes in the financial landscape are closely tracked. As central bank of issue for the Euro, the ECB and the Euro system also have a statutory interest in the safety and efficiency of payment systems and market infrastructures. One of the most active fields of FinTech innovation, which might affect the processing of payments and securities, is that of distributed ledger technologies, DLTs, such as the blockchain. Given the rapid pace of development in this field, there is a need to constantly monitor and assess potential new or more pronounced risks, resulting from the application of new technologies such as DLTs to payment, clearing and settlement infrastructures in particular. One such possible risk is an increase in market fragmentation if different DLT approaches were to become firmly established in parallel in different member states. Moreover, the Euro system oversight framework has to remain effective if we are to discharge our responsibility in this new environment. And the Euro system will of course continue to act in accordance with its mandate to promote the smooth operation of payment systems. FinTech also gives the financial sector more generally a chance to provide more efficient and effective services to households and companies. FinTech can, for instance, make it easier for banks to adjust their business models, cut costs and exploit new business opportunities. FinTech companies can also complement the lending capacity of banks by acting as an additional channel for accessing credit, for instance through peer-to-peer lending platforms. This may in turn help to reduce the macroeconomic fallout from disruptions in the provision of bank credit to households and firms, including smaller ones. At the same time, the increasing relevance of known banks and digital innovation in the provision of financial services may also harbor new risks. It is, for instance, essential to assess and adapt the prudential framework to cater for the increased role of known banks and financial innovation. Ensure the existence of a level playing field for both new and existing players, and provide supervisors with adequate tools to address new risks. To this end, we are actively involved in ongoing work at both European and international levels. Furthermore, risks stemming from the use of new technologies need to be carefully managed, particularly in the context of heightened cybersecurity concerns. Cyber risk has long been a priority for national and European supervisory authorities. Since day one, the ECB Banking Supervision has also addressed the issue from various angles. As financial market infrastructure overseer, we also need to ensure that individual systems, as well as the network as a whole, are operationally resilient to cybercrime. While we are closely monitoring potential risks from fintech, we also contribute to financial innovation by acting as operators. The Target 2 Securities T2S platform that went live in June 2015 is now a cornerstone of the Capital Markets Union project, and has given a strong impetus to promoting and creating harmonized, integrated and efficient euro payments and securities post-trade services. The ECB is also acting as a catalyst in the creation of a truly single European market for payments and securities. Financial integration and financial development are distinct, but interrelated concepts. Therefore, in designing the necessary institutional and regulatory frameworks, we need to make sure that financial integration and financial development reinforce each other. Thus, improving the performance of the financial system. This is why EU legislators have an important role to play. A Europe-wide harmonized and principles-based framework to regulate fintech in the context of the Capital Markets Union agenda would indeed help to create a level playing field from the outset. This would in turn foster cross-border investment and expansion. So, as you can see, fintech has the potential to improve efficiency in the financial sector, create better products and push prices down for consumers. But it has other dimensions too, in the shape of potential risks and new regulatory questions. It's in all our interest to rise to this challenge. As fintech involves the entire financial sector, different regulatory responses are likely to be needed. Depending on the nature of fintech activity, those responses may need to encompass prudential, consumer protection and other regulation. But at the same time, they should not hamper healthy developments. Allow me to conclude. The euro area economic outlook is improving and downside risks are moderating. However, these positive signs should not distract from the need for firmer and higher structural economic growth. In this context, higher productivity growth is needed. And that productivity growth requires innovation. Structural reforms are essential to create a business environment that is conducive to innovation and a regulatory environment that adapts accordingly. Both national and European level initiatives can contribute to this effort. If we want to make sure that our economic and monetary union thrives, we need to upgrade the institutional framework. This means that we should be ready to foster innovation wherever necessary, including in the functioning of the email. In that spirit, I look forward to the debate that will be opened up by the upcoming European Commission reflection paper on deepening the economic and monetary union. Thank you for your attention and I'm now available for questions. Thank you. Thank you, President Draghi, for your very rich introductory statement. In particular, we appreciate a very in-depth analysis on think tech and financial innovation. This committee has recently adopted also a report on this topic and I think our assessment are pretty much in line. We start now with our question and answers. The first speaker is Mr. Brian Hayes. Thank you, President Draghi, and welcome back again to Econ. It's very good and encouraging to hear your remarks on FinTech, which as our Chairperson said, recently went through the European Parliament. You outlined the risks and opportunities on FinTech, which we all welcome. Other colleagues, I'm sure, will ask you questions on that. I have two questions, President Draghi. The first question is a Brexit-related question. And it's to do with the question of banks relocating from the UK to the Eurozone area. As you know, the ECB, in cooperation with national regulators, takes the final decision on granting a banking licence to those who want to establish within the Euroarea. So you have a key role in that. And given remarks that have been made by Daniel Neuer, your colleague, remarks that have been made by Esma Aniopa about a potential race to the bottom, a regulatory race to the bottom when it comes to supervisors in the Eurozone not creating a level playing pitch, what can the ECB do to make sure that there is a level playing pitch when it comes to the decision as to which of the member states of the Eurozone some of these banks may move to. What's the ECB doing there? That's an important question. And then my second question is an Irish-specific question. As you know from our banking crisis, we have a bank, one of the banks in total public ownership, Allied Irish Bank. It's one of the 125 systemically important banks under ECB operations. You're aware the Irish government want a partial sale of Allied Irish Bank. And I have two questions for you. One, do you think that now is the time for a partial sale? And could you say to this committee, to the Irish people, from your view, what are the long-term benefits of that in terms of a better banking, a more stable banking environment for the Irish people, but also in terms of the future stability of the banking system in Ireland? Thank you indeed. Thank you. On your first question, of course the ECB is preparing internally for all possible implications coming from the withdrawal process of relevance across the wide range of ECB stocks. And this also applies to supervisory aspects. Now banks are preparing for the UK's withdrawal from the European Union and planning the necessary steps. We are in touch with all of them, following closely this process. But of course, as you pointed out, it's not only up to us, but also up to the national competent authorities to follow this. Now, of course, we stand ready to support the banks to reorganize their activities in the Euro area. And it's very important that these banks undertake all the necessary preparations in a timely manner. So the first thing is to be timely. By the way, we'll have a chance to discuss this perhaps in the context of different questions. But many of the risks that people view in the Brexit process have to do with the way this process is going to be managed. Inherently, if it's well managed, many of these risks will never materialize. And management, however, has several actors, one of which is the banks themselves. So they have to start preparation at an early time. Now, we got to ensure that all banks that operate in the Euro area meet the standards of the European Banking Supervision. And so it's important that neither the safety nor the soundness of our banking system are going to be worse after the process. However, as you pointed out, there are actually risks of supervisory fragmentation and supervisory gap that the SSM currently cannot address. Banks might choose to set up broker dealers or author country branches, both of which would not be supervised at the European level. Here, you as legislators would need to act to ensure that similar risks are treated similarly and that regulatory arbitrage is to be avoided. So very important the role of the European Parliament in this process. Now, on your second question, first of all, let me say that it's entirely up to the Irish government to determine the appropriate timing of a return of part of the government stake in AIB to the private market. More generally, it's quite desirable to transfer the risks of equity holdings in banks from the taxpayer to the private sector. I would like to note that the process of repairing the balance sheets of Irish banks has advanced significantly since the crisis. Silly progress is there. Great progress is there. Thank you. Thank you also for raising the issue of broker deals and risk to raise to the bottom. We are, of course, aware of that and we look forward to strong cooperation between all the relevant actors including national component authority in order to positively address this risk. I don't know if it's a good example, but I'll imitate the EPP by asking two questions. First of all, President, you are one of the authors of the five presidents report and this report is perhaps becoming more topical once again. And you, in fact, indicated that in terms of EMU's functioning, the institutional questions need to be raised again at some point. And we see some ideas cropping up here and there, for example, the idea of transforming the SSM into a European monetary fund, which would necessarily be a community system, but an intergovernmental one. Well, do you think that this is in line with the spirit of the five presidents report? Do you think this is the right approach, one which would allow EMU to work correctly and ensure that it respects the balance between the EU level and the member state level in terms of fiscal policy? My second question relates to the ECB's exit policy from the current policy. You have a commitment to meet by the end of the year and we see different ideas here, different assessments of how communication on this should be done regarding what you will do after the end of the year, particularly taking into account wage developments. In Berlin last week, what we heard was rather that as of June, some indicators, for example, wage indicators would allow us to develop some idea about how we can exit from current monetary policy. Could you tell us a little bit more about that today? Thank you. I agree with you. I mean, even though I shouldn't say because being one of the orders that the five presidents report remains, in a sense, at least is the first attempt to have a blueprint for further progress in the future. As such, as you know, it has to sort of consider two different horizons, one in what to do in the short term and another one what to do in the longer term. The changes in the purposes of the ESM are part of something that is probably more for the longer term to the extent that they do require changes in the treaty. In any event, let me say it's way too early to say something precise in this manner, in this matter, and that we just will have to further study. But what's important here is really we don't have a piecemeal approach. What's important is that we are able to collectively define a path that we want to follow, a path that will necessarily drive us to a convergence that is more and more based on institutions building and less on rules only as it is today. So that's very important that we have an overall encompassing path and not a piecemeal approach to the creation of institutions. The second point concerns our monetary policy. Well, we have to, as you know, next week we'll have a governing council meeting. It's going to be a monetary policy governing council meeting and by then the governing council will have the new staff projections. What we've seen so far is that, as I said in my introductory statement, while growth outlook is improving and will continue to improve, while the recovery is indeed solid because it's more and more based on consumption and not on exports, and it's broad because it's now across various countries and sectors. Well, one thing that we always, in a sense, refer to as far as broadening of the recovery is an index we calculate about taking, it's a dispersion index of the growth in value added across different countries. The less dispersed is this index, the broader is the recovery and we see now today is that the value of this index today is at the same level as it had in 1997. So way, way before the crisis, which seems to say that basically many of the problems that we had with the crisis like financial fragmentation, the problems with our monetary policy transmission and the very uneven growth across different members of the eurozone are now overcome, are behind us. At the same time, when we turn our eyes to inflation, we see that inflation is, is underlying inflation is still subdued, although the headline inflation has gone up to 1.9%. It was mostly due to changes in energy prices. And as the energy prices may decline, we do expect and headline inflation will also decline as well. But underlying inflation excluding food and energy is actually being subdued. And one of the reasons for this is, as I've said several times, is that the wages, wage growth is still, is still subdued. Though we start observing the beginning of some, some growth in various parts of the euro area and some growth in producers prices as well, it's still very, very early to make us think that we're going to change. We're going to change the monetary policy stance. In other words, the projections that we had so far were predicated on us maintaining the extraordinary support to monetary policy accommodation that is in place. Thank you. Thank you. Notice, Marias. Thank you very much, Mr. Draghi. Now, when and under which conditions can the ECB or will the ECB decide to allow Greece to be part of QE? So how can the bond market become part of the program? The central bank of Greece between 2015 and 2016 has spent 40 billion odd euros. So under which conditions can the central bank of Greece manage to buy bonds from Greek companies and Greek banks, thus supporting development in Greece and creating growth in jobs? President, I'd also like to put to you the following proposition on monetary policy in the eurozone. This is a proposal that I put to the parliament on the 7th of May in Strasbourg. Mr. Draghi, the European system of central banks, well, could it be more flexible? Could it be made more decentralized so that the national bank in each member of the eurozone could have its own monetary policy that would be better adapted to the economy of that country? Whilst also having other non-manetry tools available to it as well? And so that countries could work on the basis of their current balance sheet? What it means is that the Bank of Greece, through using QE, could conceivably have a monetary policy that would be better adapted to the needs of the Greek economy? Thus creating money, we're talking about something like 70 billion euros, 2% of the capital of the ECB is held by the Bank of Greece. So I think that that would be one source of investment for us. The response to your first question is, first of all, what is needed is a positive conclusion of the current negotiation from this viewpoint. We certainly welcome the staff level agreement that was reached and we regret that a clear definition of the debt measures was not reached in the last euro group. Then we will have the debt sustainability assessment of the other institutions, but then also we'll have to have a debt sustainability that the ECB and the governing council and its full independence will have to undertake. And this will have to show that debt is sustainable also in adverse scenarios and we'll also take our decision based on risk management considerations, as we've said repeatedly. So first let's have an agreement and let's, full agreement, let's find measures, debt measures that will make the debt sustainable through time. On your second proposal is, well, I mean if we were to have 19 central banks with 19 different monetary policies, we'll end up naturally having 19 currencies. And that's the basis of having one currencies who have one monetary policy and all our objectives are defined as objectives for the whole of the euro area, not objectives for the single country. As when we talk for example about inflation, we talk about inflation for the euro area as a whole and not inflation for one country as opposed to another country. Thank you. Just a second. Well, just a minute, my proposal was very clear. I asked you a question about the Bank of Greece. Under QE, the Bank of Greece has spent 42 billion euros. But the question is, under which conditions could the Bank of Greece also buy bonds from Greek companies and from Greek banks within the framework of QE? If and when QE will be extended to Greece, we will certainly have the eligibility of whatever Greek companies in the corporate bond purchase program provided they satisfy the eligibility criteria that have been set for the companies to be part of this program. Thank you. Ramon Tremosa. Thank you very much. Welcome again, President Draghi to the European Parliament. Since June 2016, the European Central Bank has purchased more than 75 billion euros of bonds from private corporations under its corporate sector purchase program. I always have had doubts over this program. I'm afraid we are distorting competition among eurozone enterprises. Moreover, the lack of transparency makes it even worse. At least in Germany, we have a best practice of the Bundesbank publishing the names of the companies, but it is not the case of some central banks in the south of the eurozone. So not even it is very difficult to know which companies debt is being purchased, but the volumes are not published in an adequate way. This is why, together with so many MEPs of this committee, we have asked the ECB for clarifications of this program through our written questions that we sent you two weeks ago. So in our opinion, this lack of transparency at national central bank level is harming the ECB, and it is a pity as the ECB has made great strides towards more transparency. For instance, the publication of the Minutes of the Governing Council or the publication of the Target to Balances that I myself have been defending for years in this house has shown that the more transparency there is, the stronger the ECB becomes in front of the public. So my question is, is the ECB going to put up guidelines to ensure more transparency at national central bank level in the CSPP? Thank you very much. Thank you. While you will get a written answer to your question, of course, as there was a written question, let me say just a few things at this stage. We have six national central banks that undertake that are part of this program, and they do publish a list of CSPP holdings available for securities lending. Interested market participants can obtain necessary information by looking at the data published by the NCBs with market data providers and also on the ECB's website. An online database search can be performed for each of these, and among other information, the search will also return the bonds issuer and its residents. Each purchase in national central bank has discretion to decide whether it will publish any additional information, in addition to the bonds issuance on its website. So it's not so much in our hands, it's in the hands of national central banks. But we are out of view that the information provided by the NCBs is sufficient, and we see no reason to try to centralize the publication, which right now is completely in the hands of national central banks. You'll get further responses in our written response. Time for a follow up. Yes, I have two minutes. Dear President Draghi, without enough transparency, I think that we have the danger that monetary policy is misused by certain central banks to fit crony capitalism. For instance, the main important newspaper in Spain, Expansión, published that there were rumors that only three big companies in Spain had received more than 50% of all the purchases done in Spain. So I think that we should have this information concentrated at the ECB level from all national central banks. Because if not, we are doing business as usual, and it is very difficult for us to justify this in front of our electorate. What is the market discipline in this sense, or we are feeding companies that are not viable in the markets? Well, let me assure you that the companies are being chosen on the basis of risk eligibility criteria. There isn't any intention to favor one company or another. And there are certain guidelines, and of course there are volumes that are being decided by the purchasing banks together with ECB. But we are not going to disclose the guidelines or to disclose the volumes, because you would simply foster activity by market participants which could actually hamper the achievement of our objectives. When will finish this program? No, the time is over. It's not for since, it's just part of the ongoing program. It's like what I said before, it's part of our monetary policy stance, so it will be decided by the governing council. Thank you. Miguel Urbán Crespo. Thank you very much, Chair. Mr Draghi, the issue of the banking bailout is still causing political and legal ripples in my country. As you'll know, deloids were fined for their role in auditing bankia before the bailout. And it has been shown that they presented a report with 12 clear mistakes which hid the real losses of bankia. In recent weeks a judge has decided to charge one of deloids associates for bankia being on the stock market and the auditor in question has been held given civil liability. And the charge could also mean that deloids are no longer used as auditors. Then with Rodrigo Reto, when he was the chair of bankia, gave contracts to Lezard which at the same time he was receiving payments from that company in an overseas bank account. Now unfortunately, what has happened in my country is also happening throughout Europe with banking bailouts. And we have seen how the big four auditing companies have benefited from a huge business in bailouts as was recently pointed out in a transnational institute report. However, these are the companies that are still being used and has been seen for example with the Banco Popular in Spain recently and the ECB is still using them. We think this puts the European financial sector in a very, very risky and vulnerable situation and we would like to ask you the following. What can the ECB do as a responsible supervisor to finish this situation of oligopoly and stop these things happening again? And also have you thought about using a public, independent public auditor which would mean that there is no longer dependency on the private sector and would remove us from the current situation of oligopoly. Thank you. Thank you. Now of course I won't comment on specific institutions. Let me tell you that I'm going to give you a written response because at present time it's not clear who actually chooses the auditors and what's the choice process of the auditors. So whether it's the ECB, the SSM part of the ECB, the supervision part of the ECB or it's the commission or it's the DGCOMP or it's both. It's just something that I will be able to explain better in a written response. The proposal to have an independent public auditor is something that Sildi were thinking about but just at the moment I don't have any view about that. Thank you. Thank you. Philip Blambert. Good afternoon, Mr. President. Two questions. I'll try to be very quick. On the Eurozone, of course the new situation in France may offer possibilities. I'd like to ask you to classify the idea of a Eurozone budget with corresponding borrowing capacity into one of three baskets. A must-have, a nice-to-have or something we should not have in order to guarantee the sustainability of the common currency. The second question is regarding labour market reforms. The kind of reforms that you have been advocating goes in the direction of flexibilizing the labour market pretty much in the line of reforms that were made in Germany under, by the way, a red-green government in the earlier notice. Now what we see is that when employment goes up, it is usually in a way that most new jobs are part-time jobs, not indefinite-term jobs. So really, I wouldn't say all of them are shitty jobs but they are going into the direction of weak quality. What interests me is not the unemployment rate but the employment rate. And the employment rate expressed in full-time equivalent culminates at 75% in Sweden, is only 68% in Germany, 63% in Belgium, 55% in Italy. And when you look at the labour market dynamics from that metric, you cannot imagine any kind of growth rate that would bring us anywhere close to full employment. So maybe the kind of structural reforms we need for the labour market policy, and I would link that to fiscal reforms and to social security reforms, are maybe not exactly the ones that you would advocate. I'd like to have your thoughts on that. And on your first point, it's time for reflection and it's time for thinking about the future. And it's time to outline what the future will be in a way that is more defined, clearer, and probably more, I would say, more long-seen than has been done before. So it's time to think about now about whether our rules-based convergence framework is still, whether it can be improved. The experience of the last few years tells us that the monetary union, the economic and monetary union, has actually resisted to the crisis but going very close to very critical situations. And therefore it's just natural to think about a construct that is being threatened in such a serious way less frequently than we've been in the past. So from this viewpoint, the economic monetary union remains fragile and it needs to be completed. And we know that part of its fragility depends on the fact that it's not been completed yet. So we have to move forward. We have to move forward on different plans. There are many things that we can do quite quickly or in a relatively short time. There are other things that we may want to start working for. It's very important that we start thinking without fear of changing, for example, without fear of changing the treaties if needed. And already to take a decision like this, namely start thinking without being bound by the existing treaties is a big step forward. We've said several times that some, let's call it fiscal capacity, was an important way to complete our union. And for a variety of reasons, one of which is the union would become much more solid in resisting to shocks that hit different parts of the union in different ways. And also because if we look at any union has a federal budget. So now the problem is how do we get there? Not the problem. What we have to look at is how do we get there? And here the answers continue to be what we've said in the past, namely that to move there you need, first of all, trust between countries and you need convergence. You need convergence towards a certain, in other words, a two heterogeneous union will be inherently fragile. And so in order to move to greater convergence, one, first of all, needs to finish doing what's been planned and done until now has to be completed. But also convergence in policies is very important. Convergence, run serious structural reforms, serious economic and fiscal policies, complete the banking union. All this is part and parcel of the convergence process. So now let me come to the second point, liberal market reforms. I think that by and large in many parts of the union, first of all, it is true, what you said is absolutely true. Often the increase in employment is not, even though it's very significant, let's not forget five million jobs have been created in the last three or four years. More, many more that were created before the crisis. And so from this viewpoint, that's a positive news. Now it's also true that some of this job creation is not of good quality. It's also true. So what to do about that? First, also let me say that by and large, most member countries of the union have undertaken reforms of their labor markets in order to make them more flexible. But now there is another set of reforms that have to be undertaken, namely to grant, to create a situation where the newly employed would also have the skills to have a long lasting employment. And to have the skills, that's where we have to reform or some of us have to reform our educational system. And that is also the other part. So in other words, as much as one may have insisted in the past in making labor markets more flexible, one should insist today in upgrading our educational system so as to create jobs having a long lasting timing and quality. Which, by the way, would also be accompanied by higher wage growth because it would go up together with productivity. So it would be a win-win situation from all viewpoints. Thank you. And of course I don't need to remind that this committee and this parliament has adopted the report which proposes a way to proceed jointly to stronger convergence and providing such a tool for absorbing shocks. And it is an ambitious but realistic, at the same time, proposal. Gerov Anemans. Now usually you give a standard response to this, but I'd like to give it another try and ask the question of when Q&E is going to stop. Which I think is having a very negative effect on savings and pension funds in a large part of the Euro area. The ECB is not involved in politics. You say you're only going to do this for the objectives of price stability. Others say that you have a political objective which is to pay for state debt in Greece and make sure that Germany has a cheap currency. But the fact is that the stretch of 500 billion on your balance sheet is very serious. And there seems to be only one agreement which you are prepared to honour which is that you won't go above 33% of state debt of a Euro area member. You reacted quite vehemently when questions were asked in the Dutch parliament recently about the fact that if there were a default situation you may end up paying a political role. You said that this was a zero probability event. But I'd like to put the question in a slightly different way. If you have to respect the 33%, could you say that which country would have to cut their state debt as a result of this in the context of the Q&E program? Thank you. Let me say immediately that we are aware that the situation, a protracted situation of very low interest rates do indeed require, well, do indeed are a challenge for mostly for pension funds and insurance companies and more generally for individual savers. There are certain many things that can be done to address the situation by both pension funds, insurance and savers, but and these are certainly actions that need to be taken are being taken as a matter of fact, but certainly they are a challenge. However, the reason why this is so is because, as I've said many times, the situation did require low interest rates as a prerequisite to restart the recovery, which we are on a good way to actually deliver now. And let me also add that as far as the reasonings or the other reasons that are often quoted by several parts because of for our program, I'll restate what I said, namely we are bound by the law to our mandate, which is to pursue price stability as defined of rich rate of inflation, which is below but close to 2%. And that's what we've been doing and that's why we created and we introduced the asset purchase program. And that's why we've been buying bonds regularly at the rhythm that now it's 60 billion euro per month. And that's but also we are also as much as we are aware of the side effects that these programs might have, but also aware of the fact that we are also bound by the treaty not to do monetary financing. And that's the reason why we had this issue in issuer limits in our program. Having said that, we are and we are seeing the program continues to run smoothly. We don't plan, the governing council has never planned to break the limits, the limits out there and they will stay there. I'm not in a position now to respond to your question which countries we are going to go buying less bonds now and in order to respect these limits. Thank you. Thank you, Beatrix von Storch. Yes, thank you very much Chairman. Thank you Mr. Draghi. At the beginning of this year you responded to a colleague's question, that's Mr. Vali and Mr. Tzani. We're talking about the target two system since the 18th of January we got an answer from you. If a country were to leave the euro system its national central banks in English would need to be settled in full. Now that answer dealt with the hypothetical scenario of an exit from the eurozone. That wasn't really what was being asked about, but of course exit from the eurozone is a worst case scenario. And if we're talking about ifs and whens then maybe we could talk about a scenario that would be closer to us than maybe an actual exit from the eurozone. So I'm quite surprised by the answer you gave to the Dutch parliament at the beginning of the month. At that occasion you were asked what would happen if a member of the eurozone were to restructure their debts or would have to restructure their debts. Not leaving the eurozone but restructuring. Your answer was we don't want to speculate about the probability of things that have no chance of happening. And then you said why did you ask me that? So that's the question that I am asking you however. And I'm referring you to the answer that you gave to my colleague Mr. Vali in January when you did talk about a hypothetical scenario, a hypothetical worst case scenario. What I'm asking you is what would happen if a member of the eurozone were to end up being insolvent and would be forced to restructure their debts, particularly given the huge quantities of sovereign bonds that lie in the ECB reserves. Why doesn't the ECB do the same as happened in 2010 when Greece was about to go bankrupt and the ECB brought up Greek bonds in a massive manner to try and prevent Greece going bankrupt? Now let me just give you two or three quick answers. First of all I reiterate the euro is revocable and this is the treaty. So don't try to link debt restructuring with euro issues or settling the target two liabilities. Second, you actually asked me what happens when a sovereign state restructures its debt? I answer look at Greece. Third, you're saying that we are bearing risk for the whole of the euro area because of the bonds that the ECB has bought in various countries? The answer is there is no risk sharing other than a limited amount. So in the greatest part the risk of debt restructuring falls upon the National Central Bank. Thank you. Thank you. Thank you President. Well I will talk about something topical but certainly more harmless. In March we had a record in Germany. We had a target to 1.2 billion surplus and in a series of other member states in the south of Europe there were considerable deficits building up. So what do you see about this? In the sustainable situation last time around you talked about this being related to quantitative easing. But in that case France should have a positive balance whereas France actually has a balanced target balance. So I haven't quite understood this. And what measures do you think need to be taken in order to bring the situation back into balance similar to the one we had pre-crisis? Thank you. Let me first observe the current increase in target balance. I will say in a moment why it's very different from what we observed in 2012, 2013 at the time of arguably the most serious crisis. Now the increase in target to balance is closely linked to the decentralized management implementation of our monetary policy. And much of it is produced by our asset purchase program. Why? Just let's observe that about 80% of the counterparts to central banks that sell the bonds are outside the borders of the country where the central bank is located. And 50% of the counterparts are no-neuro area members. So the central bank of a certain country buys the bonds from these counterparts. But these counterparts then use the cash to deposit this not necessarily or generally not with the central bank that sold the bonds because this proceeds to deposit them with the central bank of large financial centers first and foremost the Bundesbank. In this way the final reporting will be a liability, a target to liability by the central bank that has sold the bonds and the target to asset by the German Bundesbank or banks equally settled in large financial centers. So the first consideration is that it has to do with a decentralized way in which our monetary policy is implemented. The second point is however is that our monetary policy is operates to the system in producing what we call a portfolio rebalance. Namely the sellers of these bonds would use these proceeds to buy other assets, equities or other types of bonds both located in the euro area or outside the euro area depending. So we have to follow all these movements in order to understand that the increase in target to liabilities is associated with a loss of interest by the sellers of these bonds into assets of a specific country. Finally let me tell you why this is different from what the increase in target to liabilities we saw we watched in 2012 and 13. It was basically due to the fact that banks in the euro area all of a sudden so especially in the periphery of course so that their market-based funding was drying up and therefore they had to be refinanced by the national central bank in their jurisdiction. And this created target to liabilities quite dramatic but they were really dramatic because they basically showed the fact that these banks were really looking for assets from the central banks. So in this sense it's a demand driven process. Today the situation is different. It's a supply driven process because we are we the national central banks are selling assets to the commercial to the various countries both commercial banks pension funds savers insurers and so on. And so it's this portfolio rebalance which generates given the decentralized nature of our monetary policy implementation generate such high target to liabilities. Do we observe signs of stress in the markets not not not right now if we look at funding conditions they are very favorable both for commercial banks and for no financial companies and for the real economy where we observing a stressed conditions in 2012 and 13 certainly so we saw we you remember very high interest rates very great difficulty in finding financing. So the situations are inherently different between then and now. Thank you. Yeah. President it's a pleasure to have you here and I have two questions for you. The first concerns the prospect not in the immediate future but nevertheless of an interest rate reversal. You've given us a very impressive picture of the broadening of the recovery. And yes obviously price dynamics is still subdued but nevertheless now might be a good point to reflect on what an interest rate reversal might mean. reversal might mean, in particular, what it might mean as a challenge for high-debt low-growth economies. And so my question is this, which aspects of the current discussion we're having on the serious deepening of monetary union would be particularly helpful to immunize our monetary union against systemic disruptions stemming from such challenges? And more specifically, how should the sovereign bank nexus be dealt with in this context? I believe a solid answer to that question would also make it much easier to achieve political consensus for fiscal backstop for banking union and agreement on European deposit insurance. So that's my first question. The second question has to do with the file I'm working on, the CCP's, obviously Brexit poses a serious challenge to the regulation of the financial sector. Some of that can be dealt with by strengthening the third country regime, third country equivalence regime, accepting basically the regulation going on in a different jurisdiction, for example, as will be the case for the UK. Another approach would be extraterritorial. The US is doing that a little bit already applying their own rules abroad in supervision, for example. And thirdly, there would be repatriation. And I'd be curious, and that's my question, how you feel which area financial sector regulation to control risks should fall in which category? And more specifically, what is your view with regards to CCP's, the area we're currently working on? Thank you. Thank you. We've actually already seen an increase in interest rates across the yield curve. And our assessment is that it's caused by, half of this is caused by increases in real rates. And half of this, namely linked with improvement, general improvement in economic conditions in Euro area. And half of this has to do with the reduction in the insurance premium for deflation. In other words, markets feel that deflation has become less of a danger. And therefore, they need less of an insurance. So both of them are good news. Though in the presence of inflation expectations, which have only marginally picked up over the last 10, 12 months, in a sense, that is the... So has this created a phenomenon of big instability? Not that we can actually assess now. Can we rule out that an increase in interest rates would ever cause... No, of course, no, we cannot rule that out. It's pretty clear, trying to address in a sense the essence of your question now, it's pretty clear that as the inflation rate will durably converge towards our objective, as this convergence will become more and more self-sustained, countries with high debt and low growth will have to face a higher interest rate bill. And from this viewpoint, they will have to have in place right policies to do that. Both fiscal, but also especially growth enhancing policies, because that is possibly the most important part of their economic policy. Now, should we think about an institutional setup that would rule out, exclude any possible instability, because some countries are lagging behind in their convergence process? Well, probably if we look at the historical experience we had in the early stages of the Mastery Treaty, it's both things. Countries have to act and put their acts together and put in place sound economic fiscal policies. At the same time, you are absolutely right, the nexus between sovereign and banks has to be severed through the introduction of deposit insurance scheme. At the same time, our institutional progress in creating stronger institutions that would resist better to potential instabilities stemming from states that are lagging behind also should go forward. It's an overall all-encompassing process that we have to envisage for the future. Now, on your second question, let me just refer to the communication by the commission on CCPs that published on May 4th. And there, they foresee a number of different options for strengthening the supervisory regime applicable to CCPs, including the enhanced supervision at EU level and or location requirements. It will be ultimately to you, to the EU legislator to decide which type of regime to apply to systemically important third country CCPs. For the ECB as a central bank of issue of the Euro, it will be crucial that it can at least preserve the current level of involvement over systemically important Euro denominated clearing activities. Regardless of the framework adopted by the EU legislator and of the terms of the future EU-UK relationship. In other words, it's very early for us to design exactly the sort of final construct. But certainly what we want to preserve is at the very least to preserve the current degree of involvement. So we had to have proper tools under the EU law in order to ensure that can preserve the stability of the currency in the phases of potential risk created by offshore Euro clearing. In this regard, we certainly welcome the commission's communication. And that communication fully acknowledges the role that the bank of issue has to play in this new environment. Thank you. Thank you, Gabriel Mato. Thank you very much, Chair. Thank you very much, Mr Draghi, for being with us again. I'd like to talk about the future and two particular points. Well, when it comes to the political future, there is some doubt. If you look at the recent comments by Chancellor Merkel, we can no longer trust people outside us. We have to look inwards more. And then in France, people have said that things we need to see significant reforms to complete the Euro. So there are some countries in Spain as well. May see may be happy to see more fiscal integration, more supervision, parliamentary supervision as well, and finishing up the banking union. So I'd like an assessment from you, if you can, on these proposals and whether you think it would work to have that sort of agenda. And then again, on the future, future on supervision in Europe, now the European Commission was carrying out a public consultation on the future of these supervisory agencies and whether they were meeting expectations and meeting the objectives that they had said, what the public thought of that. And I would like to know what you think the future may be there. And then a classic really, the question I always ask, and really it's on everybody's lips. And that is do, well, you yourself said quite clearly something that we all agree on, and that is that there is a clear improvement in growth who are better than 2009, more confidence on the markets. That's without any doubt. And that structural reforms as well are there. And we also have to encourage innovation. Now, there are those who have decided to change their policy on low rates. And I just wonder what do you think the scenarios planned by the ECB would be? Now, I'm pretty sure that you're not always going to answer this question. But do you think that there might be a hike in interest rates over the next few months? I'm pretty sure the answer to that will be a blank. And then very quickly our trade relations with the United States, and Mr. Trump was here just last week, and certainly things are very worrying there, in particular when it comes to the trade relations we may have with the United States. Anything from that on anything on that from you, please? Thank you. Thank you all. First respond to your first question. We certainly welcome the consultation process that commission started on the role of the SAs. Let's not forget the establishment of the SAs in 2011 was a major step forward towards the creation of a banking union. And then it's going to be the pillar upon which the capital market union will also be created. It's really the major step towards having a share in one supervision system, a one regulation system in the Euro area, in Europe actually. We've been collaborating throughout with the commission and with the SAs on that. Now, the SAs have been operational now for six years, so it's high time to have a review of them. And now we are currently assessing all these issues raised by the consultation paper. And it's very, at this point, this stage is very difficult to foresee what future, what will be the future of the SAs, how they will be put together, whether their competence will stay. The only thing that we could and should do at this point is to have a very strict close collaboration cooperation with the commission on ensuring that our supervisory system will get stronger after the review and also uniform as much as we can because let's not forget, we still have many national discretions, options in various countries that make the present system not harmonized fully. The second question, as you foresaw, correctly, is very hard to answer for me at this point in time. I can only restate the monetary policy stance that says basically the current stance will stay in place until we see a convergence of the rate of inflation, that it's both for the whole of the euro area and inflation rate of some of a level which is close but below 2% for the whole of the euro area, so not for one country or the other country, which is durable. So it's not transient, it's not touch and go, it's not like we've seen now where headline inflation went up to 1.9% as I was saying before, but it was mostly due to energy price increases. If we look at that and then now they're going down and so headline inflation will start going down as well. So it's, we will have to be convinced that it's durable and we'll have to be convinced that it's going to stay there even when we will withdraw the monetary policy support that we have in place today. On the third point is in the sense it's certainly we are, we are, we are all are concerned. We are all, it says the whole construct of the European Union of the single market is based on sharing the benefits of free trade. In this sense now of course the, what's happening over the last 15, 20 years is that free trade and together with free trade globalization has produced immense benefits but also has produced people who didn't actually share the benefits. And so we have to do much, much better in sharing the benefits with everybody that is participating to the process. But in this sense the, certainly the neo-protectionist stances that has been, that have been, have been stated in the United States are certainly of concern. Thank you. Thank you Pedro Silva Pereira. Thank you, chair. Mr. Draghi, you are very much welcome here. Let me ask you two questions. The first one regards monetary policy. As you clearly said to us today, the domestic cost pressures, notably from wages are still insufficient to support a durable conversion of inflation towards the medium term objective. And also the positive signs should not distract us from the need for firmer and higher structural economic growth. So your conclusion and I quote is that we still need an extraordinary amount of monetary policy. Can I conclude from this that the so-called separate of monetary policy remains out of the ECB intentions for the foreseeable future? The second question regards the situation of Portugal. As you know the European Commission has very recently proposed that Portugal should be out of the excessive deficit procedure, taking into account the reduction of deficit and all the positive developments in the economic front, economic growth, decline in often employment. In this context the Portuguese government, I would like to ask you how do you see these developments? And in this context the Portuguese government has asked to pay in advance a substantial part to the IMF loan that Portugal received. I would like to ask you if you would agree that such substantial payment could also have the indirect effect of addressing the difficulties regarding the limits to the purchase program of the ECB, taking into account that those limits are now creating a situation of decline in the amount of purchase by the ECB. Would you think that this would create a new room of maneuver allowing for more bonds to be eligible for the purchase program of the ECB? Thank you. On your first question really the answer is very much like the one I gave before about interest rate hikes in near future. The developments that we are seeing on the rate of inflation tell us that the present extraordinary amount of monetary policy accommodation should stay in place until we see we see developments in the rate of inflation that the rate of inflation converges process that tell us that it's durable and it goes to our objectives and it's going to be self-sustained. In any event next week we'll be having the next monetary policy council, we will have the new staff projections and new information will become available for the members of the governing council. Now coming to your second question significant progress has indeed been achieved in Portugal on all accounts and this is the first point that we should have in mind. The second point is however is that significant vulnerabilities are still present especially in the banking sector where we still have a high level of MPLs like in other countries of especially of the periphery and these vulnerabilities need to be addressed. Need to be addressed for their own sake first for the stability of the banking system but also for for exploiting fully the capacity of the Portuguese banks to support and finance the economy the real economy. NPLs are a drug on the capacity to give credit to the firms and households that need that. Your third point the answer is I don't think so. I don't think that the payment in advance of the IMF loan actually is relevant as far as the QE limits are concerned. Thank you. Thank you very much chairman thank you for having made one of your regular visits here. I've got a couple of questions first of all a cash circulation and the big hole in VAT revenue. Scientific studies have told us that the two are linked to us a link together where there is avoidance of VAT. There's a lot of cash going around we're thinking of 500 euro notes at one end of the chain and the one and two cent pieces at the other. Then I could also follow on from what Jacob von Veitsecker said Euro clearing that is one of the key questions linked to Brexit. Would you think it's conceivable that there could be some form of cooperation with London that could be put together that there could be cooperation in the form that you might see today under EBA or do you think it would be possible to somehow integrate the EBA within the ECB. Then the American situation has taken some years for Dodd-Frank to be implemented. That was discussed first of all under Bush and then under Obama during the financial crisis. But now we don't know what is heading our way from the U.S. what the new president is proposing. He wants he says to repeal parts of the Dodd-Frank Act particularly with regard to the banks. In that case do you think that there are some risks that we could expect or these much more smaller than or greater than the public might know at the moment. Well on the first point whether an extensive use of cash is associated with tax evasion especially value added tax it's likely that this is so although I this point in time I don't have I don't have a precise view I can easily respond in writing to your point but it's very likely that this is so. That international cooperation is fundamental for fighting tax evasion whether through the use of cash or other means it's also undisputed nowadays by all our governments really. So no matter what what's happening that's my obviously my my conviction which may well be wrong but I think that no matter what's going to happen as far as the negotiations between between in the UK and the European Union the collaboration on tax on fighting tax evasion will stay in place will stay in place. It's something that all countries have reiterated even in the recent G7 finance ministers meeting there was an explicit state and then perhaps there is a sentence to this extent in the final press communique to which we can we can we can refer. And finally the second the second the second question was about the EBA and ECB. Well not necessarily I mean first of all they have different different functions EBA is a regulation agency the ECB SSM is a supervision agency and so we even though it's not up to us of course because it's in your hands in the hands of legislators we have we have a view that by and large the two should coexist coexist they they also they are addressing different countries the the geo perimeter is different between between the two. So this sense also you had another question at the end about oh yes the the it's early to say whether the revisitation of the financial legislation by the US government will address the that part that has to do with capital and liquidity standards of the banks or that part that has more typically to do with market legislation namely market making Volcker rules and other other other issues that are closer to market legislation or to both we we we are we are we are in constant touch but but at this point in time there isn't a clear view on that and it's actually the point you raise is very important because depending on what's going to be decided there will be a perspective which was still confident and hopeful that will happen to have a world agreement on capital and liquidity standards so has to have a level playing field across banks in in in all the world thank you thank you Luigi Morgano. Thank you. Thank you President Draghi. Thank you very much Chair President Draghi it is known that you're in stability is the aim of the institution that you chair and in the employment point is also without strong solid and growth and a growth in employment then we're still going to have weak inflation as you have said yourself on more than one occasion in recent months and you have also reminded people that either in Frankfurt or here in the regular exchange of views that you have with this committee that the monetary policy cannot be the only mechanism for supporting growth in the eurozone that there are other measures such as fiscal policy and structural reforms that we need and so I will if I may ask you two questions do you feel that monetary policy would be more effective if other than public national public spending that was more favorable to growth there was at European level a fiscal policy that was coordinated an expanse of expansive nature as mentioned perhaps by Pierre Moscovici in 2016 and then second question the fiscal policy at European level could that guarantee the right policy mix if we had balance budget sorry for the eurozone based on own resources and whether we if we had that budget with a view to stabilization of the economic cycle thank you thank you yes I've said many times that monetary policy could be way more effective in the presence of policies that are up to the business cycle like a proper fiscal policy or even more importantly structural policies that increase the level of potential output growth right now the assessment of the ECB as far as the present fiscal policy is concerned is that the present the fiscal policy stands in the whole of the euro area is neutral and it is appropriate so that's the assessment right now of the ECB we we do believe that the present neutral fiscal stance is the appropriate one from the perspective of an optimal so-called optimal policy mix and yes also to the second question you made you asked me before I refer before to the vulnerability or the fragility of the monetary union because of its incompleteness some of this incompleteness has to do there are many reasons but one of which is the fact that we don't have a fiscal capacity in place that fiscal capacity is a a concept that is inherent to all the monetary unions and all the basically all the the monetary jurisdictions how to get there however is the issue what steps are necessary to get there and I think I've said many times I don't know where I said it is here that we really need two pillars upon which fiscal capacity is built one is trust and another one is convergence trust refers to the fact that in order to have fiscal capacity share fiscal powers governments and countries have to trust each other they have to believe that there can't be permanent debtors and permanent creditors that is not going to be a permanent transfer union what is being created but rather a fiscal capacity that addresses shocks instabilities adverse business cycles and therefore then it reverse things to back to where they where they were before the crisis but the second point even more important is that countries belonging to a monetary union cannot be too heterogeneous they have to converge and convergence means basically structural reforms and structural reforms are different across countries each one each each country of the monetary union needs a certain list has a certain agenda structural reforms so it's very difficult now to set a list it's good for all but they certainly have to converge and converge to where to higher growth together and we start seeing some of that as I was mentioning before through this sort of we see that the growth in value added is less dispersed than it was before the crisis way less dispersed than it was before the crisis thank you thank you yes thank you very much chairman and thank you president cash payment is still the instrument that's most used by organized crime and for tax evaders for money laundering and terrorist activities i'll give you one example president moldy in india has passed a demonetization law to try and destroy the wealth created by the black market this has had a positive impact on the indian economy in italy unfortunately there's still a lot of use of cash despite the high cost of well as a result of the high cost of credit card transactions in some cases the company takes a three percent cut of the trend in the transaction and then you have also the credit fees that are extracted from customers so i think that there are ways to increase the use of credit card to try and encourage electronic payments italy should carry out some incentive efforts to incentivize use of plastic cards to try and reduce the use of cash in payments and thus try and prevent the circulation of profits from illicit activities second question is italy is pursuing a route that many people are considering to be rather dangerous on the internet there is quite a lot of speculation about on stock market crashes and the end of quantitative easing is being speculated about quite a lot and i think that maybe putting an end to it right now might not be the best way to help our economy i don't know what you think about that well on the second question i don't really have much of a comment to make well i mean people speculate your election results and stock market crashes there's elections everywhere i can't really comment on it i don't know if i could give you any privilege to uh the opinions about speculating on election dates and outcomes um and it's linked with criminal activities here we have um we have to take stock of the fact dcb has actually acted upon on this front it's been quite active in um in um gradually scaling down up to uh canceling production of of 500 euros banknote in uh starting with a few years from now but it has to be acknowledged the fact that different populations in the euro in the monetary union have different preferences as far as the use of cash is concerned and at the same time it's also true that cash has been very much used for purposes that are not legal which can be many but uh so uh we have to be active while we acknowledge the importance and of the use of cash which is being expressed by several countries and several people populations in the euro area we've got to be active about controlling monitoring that the use of cash it doesn't support criminal activities as well so you mentioned the possibility of using the credit cards credit cards statements for for for tax reasons yeah of course that's that's something but national national authorities have a a lot of leeway in fighting tax evasion in finding ways to assess tax evasion whether this uses cash or not and of course also the authorities are the institutions and the authorities are being active at the EU level as well thank you thank you alina jill thank you chair president two points uh the latest figures show that unemployment in the eurozone is at its lowest level in eight years and it's clear that much of the successes result of the ECBs the quantitative easing program and at the same time you said today that there is a need for higher productivity growth which requires innovation now innovation in the financial sector is key but also in other fields as well and we've just concluded on the g7 and climate change was a key issue there with president trump's refusal to sign it but when we look back on cop 21 climate change agreement which the g20 leaders agreed was for clear strategic policy signals to increase global focus on green finance now i recognize that what you said that's important for ECB to have neutrality in these issues but there's a very clear commitment from europe that we have to improve the quality of our environment so isn't it time for the 60 billion euro the ECB invests in quantitative easing every month perhaps it should pursue a more bolder and transparent and a green qe if we don't do that how else can the ECB encourage the innovation in green front green finance uh my second point is on ccps and i just wanted to pick up your response to my colleague jeko von west secker and where you stress that you want to preserve the current regime and tools to tackle potential systemic risk caused by ccps in third countries what would you expect what do you expect in this regard from your cooperation with the bank of england and how do you assess the arguments from those against a euro location policy warning that this will lead to a substantial increase in raising bank capital thank you um on your first question and we when we designed our our asset purchase program both corporate and and well corporate program the point about green financing is relevant for the bond program from the for the corporate bond program we have designed this program for we have any mind monetary policy considerations first and foremost risk management consideration and level playing field so just you know the also answering the question that was was asked me uh was that was asked me before whether the corporate bond program favors certain corporations or not and the answer is clearly no because one of the one of the reasons one of the criteria was the level playing field across the different different uh actors different market actors having said that the eligibility criteria were broad enough so that many green companies bonds are also being bought by our programs so the answer to your question is you would like to see a program which is exclusively limited to green companies financing that is not a situation because we want to keep in mind risk management monetary policy and level playing field does our program accommodate for companies that to respect green financing the answer is yes so the the second question is about is about the um well the present situation you actually touched upon two two issues one is the ccp issue and the other one is the banks and what banks relocation could could could imply now the reason of course the recent uk decision to leave the euro's raise concerns regarding the euro systems ability to control the impact of offshore clearing authorities while maintain activities while maintaining the stability of the euro now in this context we welcome the commission's work to ensure the financial stability and soundness of ccps that are of systemic relevance now we know that the commission communication published on may 4th foresees a number of different options including enhanced supervision at EU level and or location requirements and so it's just too early to comment on the future ccp supervisory framework which will be adopted by the EU legislator just to mention the fact that the increased capital requirements that you raised as a danger are more in a sense relevant for the banks than for the ccps but there could be also relevant for the ccps as well now that's that's quite um quite clear we'll have to reflect closely and also to listen to there is a consultation now going on also with the industry and uh and so i think we by the way we are not party in this negotiation by the way we are not we stand of course ready to provide our advice but we are not party as such to the negotiation thank you thank you uh gunnar hockmark thank you very much i'm always struck by how eager we are to discuss institutional changes in this house and in your house rather than the difficult political decisions in order to achieve structural reforms on european level as well as on the member state level i i i must i i think that's sometimes like looking for the keys under the street lights instead of looking for where you drop them and we we are not very used to discuss the problems of growth regarding monetary policy rather we have been discussing the lack of growth but of course if you have as you mentioned earlier very different levels of growth in the member states you have very different preconditions for the monetary policy but also even more if the levels of potential growth and the possible output and the output gap are very different than the common monitor policy in is entering really huge problems and the paradox is that the countries that need most of growth are in the risk of running into problems regarding pressure on inflation and interest rates before those were having a higher level of potential growth my very simple question could be which would be very difficult for you to answer but but how can we deal with that but but if i take a step further on the question and that would be shouldn't we in some way put targets on the member states on the level of potential growth in order to measure the amount of needed structural reforms because the fact is that where you have low growth you have a lack of structural reforms and that is creating a problem for all of us yeah i i agree i agree what you said um heterogeneity um in the sense of having a different if not dramatically different potential output growth paths is is is a weakness is a fragility of our monetary union there is only one answer to that however and that's to undertake the needed structural reforms um now what could what could a common framework do to help this process in a sense we do have the beginning of a common firm framework with the c s r the country specific recommendation and the economic semester european semester and now so we have to the answer is we have to strengthen considerably this common framework we have to have in place something you suggested as a matter of fact a benchmarking system where countries do share their experiences with structural reforms and in a sense very much like they do with budgetary policies these reforms and their progress are being discussed by in a in a common way by the member states i think that is that is the answer to the present point in time may i just come back to that because i agree fully with you but in in some way i feel that we are as soon as we're talking about structural reforms we're entering nice talk we're entering nice talk with each other i mean we are polite well and so we say structural reforms and we say every country is different etc on the other hand we know very well what sort of structural reforms that are needed but they are politically sensitive and in some way we are strict on the stability pack well we are i would say we are not that very strict but but we should be strict formally we are but we are extremely vague regarding the most fundamental factors for growth and stability certainly and and the way to in the way in the sense to overcome this is on one hand the commission's role should be strengthened and i mean the commission is the guardian of the treaty the commission is the guardian of the stability and growth pact the commission could become also if not the guardian certainly the main actor in making sure the countries do respect a process of benchmarking their progress on the structural reform side so that is and then we should simply give strength to what we have already in place namely the country specific recommendations the european semester but what we have to overcome is is a sense that structural reforms are a national business only they are not any longer a national business only because the heterogeneity as i was saying at the beginning is an inherent fragility of our monetary union thank you notice marias thank you i want to come back to the question of the bank of greece which i mentioned earlier greece is not participating in quantitative easing as we know is you you can hear the interpretation it's coming through is it yes president i'd like to come back to the question of the bank of greece the greek national bank because greece is not participating in quantitative easing and you in fact have imposed very strict conditions for its participation but the greek national bank is a participating in q e q e and has spent 40.2 billion euros we have bonds from international companies gsf um so the very companies who have imposed the injustice adjustment plan on us so my question can the national bank of greece buy greek company bonds and greek bank bonds because the gspp3 program is quite different to other programs there's a difference between buying state bonds and greek company bonds so why have you made this distinction then secondly on the proposal that i made earlier and following the debate we've had there is heterogeneity within the union some countries are experiencing growth so there are differences some countries have growth others recession and you have a monetary policy which is the same for everyone now i i'm not saying that you should change it but you should give each national central bank the possibility of applying its own monetary policy which is adapted to its economy by using q u yes i am winding up now by using a q e policy which is equivalent to the level of e cb capital held by the country he has more feedback this is the third time you're making he has more feedback now to answer on that no i think i believe i answered this question before but the first on the first point each qe has its own eligibility criteria in any event you mentioned bank bonds bank bonds are not part of the qe program in no country so that is out anyway enterprise bonds company bonds is in the system yeah sure okay why don't they we will make when when and if and when we will make you e for greece we'll have our eligibility criteria there thank you so we have to conclude now i'm sorry that there is no time for cash d i but we are out of time this part of the monetary dialogue with mario drage as e cb president and and we move to the public hearing with the president drage in his capacity yes we make first two minutes suspension and then we will have the second part with by the drage in his capacity of the chair of esrb where i already anticipate we will have two group questions because we have some unexpected time constraints thank you so we are here now to our point three which is as i said the public hearing with mario drage as a chairman of european systemic risk board not to lose further time i immediately give the floor to him thank you thank you mr chair honorable members of economic and monetary affairs committee it's a pleasure to address you today my capacity as chair of the european systemic risk board esrb's unique union wide cross sectoral perspective allows us to identify and to work to mitigate risk resulting from the ongoing changes to the structure of the financial system these changes provide many opportunities to finance the real economy but as financial intermediation continues to shift from banks to known banks there is a need to identify migrating risks and emerging vulnerabilities moreover we need to develop tools which would mitigate risk to financial stability regardless of where those risks might materialize in the financial system macro prudential policy works best when it's implemented in time to enhance resilience and mitigate any buildup of vulnerabilities in the financial system in this context i would like to highlight the srb's work on systemic risk beyond banking so i'll talk about the shadow banking monitor i'm pleased to inform you that today the srb is publishing the second e u shadow banking monitor this report is a key element in the srb's risk monitoring framework which casts the net wide when mapping shadow banking entities and activities some figures the broad shadow banking system comprising the total assets of investment funds so including money market funds and other financial institutions so including all entities of the financial sector except banks insurance corporations and pension funds today represents around 38 percent of the total assets of the e u financial sector at the end of 2016 although the growth in broad e u shadow banking assets has slowed down in 2016 it has expanded by 30 since 2012 in its interlinkages with the other parts of the financial sector are also significant therefore macro prudential authorities need to watch out for the new risks and vulnerabilities emerging in these parts of the financial sector the e u shadow banking monitor highlights several risks which require our attention liquidity leverage prosyclicality and interconnectedness are the main themes discussed in this report i will begin with liquidity risk and the risks associated with leverage among some types of investment funds here i'm mainly referring to investment funds which either invest in less liquid assets while offering daily redeemable shares or which are highly leveraged excessive leverage can act as an amplification channel during periods of financial system stress and lead to fire sales while liquidity mismatch can also increase risk to financial stability as price movements are intensified when assets are sold in less liquid markets so you see that risk risk coming from liquidity shortage of liquidity liquidity drying up and leverage are intertwined and they can magnify stress in the financial system leveraged investment funds are more sensitive to changes in asset prices stress conditions may force them to deleverage by selling assets in order to obtain liquidity abrupt deleveraging typically involves fire sale feedback loops where there is a risk of liquidity shocks spreading through the underlying markets therefore given that the investment fund sector is growing relative to the financial system as a whole the srb is analyzing systemic risk posed by liquidity mismatch and leverage in the types of investment funds exposed to these risks i hope the report on this work in more detail at one of our next meetings leverage and liquidity risks together with prosyclicality also need to be closely monitored in the context of the use of derivatives and securities financing transactions sfts securities financing transactions in derivatives transactions counterparty credit risk is reduced by the collateralizing exposures through margins while collateral also plays a central role in sfts haircuts further protect the surviving counterparty against the falling value of the collateral provided in case of default margins and haircuts does contribute to financial stability by absorbing losses and helping to manage the financial risk they also limit the buildup of leverage for example the size of the haircut on sft collateral determines the amount of funding which can be obtained for a given amount of collateral merge margins and haircuts can however also be strongly prosyclical at lower levels in good times they allow the buildup of leverage when they increase in a downturn they can lead to force the leveraging and even trigger negative liquidity spirals in this context the srb recently published a report that considers a number of potential macro potential tools that target margin and haircut requirements the srb also identified practical challenges in implementing such tools that need to be addressed and therefore require further work finally the eu shadow banking monitor identifies interconnectedness and contagion risk both across different parts of the financial sector and within the shadow banking system has potential channels for amplifying systemic stress interconnectedness as a natural feature of an integrated financial system and a reflection of financial intermediation flows may take many forms it needs to be monitored given its potential to act as a contagion path as contagion paths in periods of financial stress the european market infrastructure regulation emmer has given us access to comprehensive data on the real this transactions this data will enable the srb to take an e you wide perspective and examine risks related to the realist markets across entities to this end the eu shadow banking monitor building on the first analysis of emmer data examines linkages between shadow banking entities in the realist markets it finds that known bank financial institutions are taking a substantial proportion of outstanding trades in the three largest derivatives markets namely interest rate foreign exchange and trade derivatives markets amounting to seven percent nineteen and ten percent respectively additionally the report examines the landscape of counter parties with whom no bank financial institutions engage in derivative transactions the eu shadow banking monitor also shows that sixty percent of the eu banks exposures to shadow banking entities are to known eu domiciled entities which by the way is an important consideration in the discussion we just had about ccps and euro clearing in particular the analysis shows the strong linkages between eu banks and us domiciled shadow banking entities these findings highlight the global and cross-border interconnectedness of the banking and shadow banking system and the need for international cooperation in monitoring and addressing cross-sectoral risks the risk monitoring framework for the shadow banking system has benefited from recent regulatory reforms and data advances is already taking shape but challenges still remain for instance additional efforts are required to close the remaining data gaps so as to enable cross-border and cross-sectoral risk to be mapped consistently and to provide a more holistic view of all entities engaged in shadow banking also the in addition to having more granular data the risk assessment of shadow banking would also benefit from being available on a consolidated or non-consolidated basis and I've given you an overview of the risk highlighted by the banking by the shadow banking monitor now let me conclude with some observations as regards macro prudential policy in general considerable progress has been made in analyzing the non-banking sector let me give you just one example eopa conducted its first EU wide occupational pension stress test in 2015 and has recently launched its second such test to which the SRB contributed by preparing the adverse scenario in close cooperation with eopa and ECB however macro prudential policy beyond banking is still at a formative stage while some instruments already exist for specific purposes a comprehensive and flexible macro prudential toolkit needs to be established have already mentioned instruments such as margin and air cut requirements as well as liquidity and leverage requirements for investment funds this should all be further investigated and where appropriate regulatory framework should be expanded moreover the design of recovery and resolution regimes for central counterparties and insurance corporation corporations should have a macro prudential profile so we raise these issues in response to the european commission's consultation and we continue to work on these topics it's important to give the macro prudential authorities the appropriate tools so that they can act in time finally let me underline the national institutional framework of macro prudential policy are of paramount importance for the policy to be effective so i'm pleased that we are seeing progress in this regard in two member states with no macro prudential authority the legislative process is ongoing the macro pru authority is actively used the available instruments in 2016 in particular to meet the requirements of the crd4 crr package but also to address the vulnerabilities in the residential real estate sector which i talked about when we last met the srbs recently published a review of macro pru policy and take stock of the measures adopted in e u of 2016 thank you for your attention i'm disposed of questions thank you very much and as i said before due to time constraints we have now to group our questions so and to reduce the time for each question to one minute and half first question mr kitzos thank you german i would like to ask president druggin his view concerning the risk situation of the greek banking sector we had various developments some negative some positive that in my view have to be assessed for example non-performing loans remain at an extremely high level and there was a terrorist attack against mr papadimos ex-greek prime minister ex-governor of the bank of christ and ex-vice president of dcb probably to send the message on the side of the terrorists against the bank restructuring and the management of the npl on the other hand the systemic banks approach profitability some of them have achieved it already and the stock market value has increased their stock market value has increased during the last months so do you believe that systemic risk will be controlled and the greek banking sector will be able to better finance the development of the greek economy in the immediate future or are we going to repeat the problems of the past that led to the recapitalization of the banking sector thank you we group the question thank you very much chair the commissioners just published its new proposals on the capital markets union and they have added a worrying dimension on the macroeconomic stability from the point of view of the esrb do you feel that you have all the tools necessary in order to face up to market unwanted market movements for example securitization that market is there a possibility do you have the possibility to intervene if necessary in a given member state and as we have suggested in under ongoing negotiations adjusting rates or having measures according to the lender do you think that these are useful instruments useful tools so that you have more means of intervention when it comes to stability thank you thank you very much mr dragy we're now on the third package and we're talking about a recapitalization of just a part let's say 5.5 percent have been actually used and that means that you have billions still waiting there to be used and then you have a major problem with npl's the result of that is that many greeks run the risk of losing their homes they took out mortgages they however only had 10 percent of the value of the of the home underlying it so how can we deal with these npl's well we could use use these 19 billion euros that haven't been used this fund could support families to allow them to pay back their mortgages so that they wouldn't end up being evicted from their homes and that we could have a model that would be similar to that in cyprus so that those households should be able to buy the house that they risk losing at a very good price thank you mr chair well welcome to you again mr dragy one of the biggest risks that we are facing now is related to cyber attacks we all witnessed the warna cry attacks which was actually a quite harmless ransomware attack or not harmless but a very easy attack but our whole financial system is relying on connectivity on data etc so my question to you is do you think that in your own organization but also in the national competent authorities there is enough priority given to cyber security do you for example think that it should maybe get a higher priority in the stress test of banks because we are well increasingly depending on on the digitization of our industry a second question is related to the to the clearing to ccp aren't you afraid that in the current political climate when we are talking about the localization of clearing of euros that's for example the trump administration could respond with the wishes that us dollar should only be cleared in the us because that is the sort of discussions that we are having i don't think well maybe i would like to hear what your thoughts are on that and i had another question but i'm looking at our chair and i will have to ask it another time thank you excellent finally dmitri papadi moollies thank you president mr drage i would like to ask you a question about my country the european central bank is one of the creditors and all statements have been made including yours indicate that the greek economy will pick up in the years to come and that we need a clear roadmap so that after august 2017 my country will be able to borrow on the market at reasonable rates without the need for programs and loans now you expressed regret about the lack of an agreement at the euro group meeting in may what does you expect of the next your group meeting what do you expect uh in terms of determining this roadmap you promise this yourself so that you yourself could carry out your evaluation and so that you can include greece in the quantitative easing program when will the greek people and the greek economy stop paying for the lack of flexibility and the uncertainty of the imf and others the euro group and the greek government and the greek people want to have an agreement and a clear roadmap so when are we finally going to put an end to these uncertain delays thank you i'll um i'll try to respond first on questions on greece though i mean greece was not explicitly discussed in any srb board meeting in recent times for sure now on the banking sector in greece certainly remarkable progress has been achieved um if we look at especially if we look at capitalization of greek banks today is i don't have the number of end but it's certainly multiples of what it used to be before uh the um the however we have a probably this was raised also another question we have a very high level of npl's and this is in part due to the crisis in part due to pre-existing weaknesses of the of the banking system many actions are being foreseen in the current program and in the and are necessary for a successful conclusion of the review so if these actions which involve actions by the banks actions by the government through new legislation and the creation of out of court settlement framework for disposing of the npl by the way there is one regularity across countries that the countries that consistently or that don't have a framework in place for an easy disposal of npl's or which have a judiciary process which is lengthy and ineffective or have a legislative process that it's not conducive to a disposal of the npl are also the countries with the highest levels of npl's and uh for example there are countries where we know npl's is very much a legacy problem in other words it they were created in the past and are now a stock of activities that hamper the normal credit of the banking system and countries have produced legislation which is only good for the new npl's so it's not good for the existing problem so we have not that's not the case of chris by the way um so it's um it's it's it's a it's a it's a problem that the current program with the current review is addressing and if all the actions that are foreseen there are being undertaken will be will be will be resolved in time by the way let me you mentioned you mentioned lucas papadimos he's been uh he's been a great vice president of ecb a great prime minister and he's a great great friend of mine and i wish to express all my solidarity and all the affection both me personally but also all the on behalf of all the ecb staff and the executive board and the governing council members the um we had we had about also continuing speaking about gris what do we expect for the next euro group the the response to the debt uh to the to i mean the agreement about about that what measures concerning that will make it sustainable for gris uh is an issue that's being discussed between member states on one side and the imf on the other side i think we've reached a point where the two parties will have to find an agreement and that's the only thing that's needed really now at this point in time let me also add that uh the um the qe uh for gris is not to be taken for granted we'll have to have our own independent assessment and according to uh scenarios also adverse scenarios of debt sustainability and we'll also have to take into account risk management considerations but i just want to make clear that the debts that sustainability assessment undertaken by the commission by the imf by the ecb in that role doesn't imply the next debt sustainability assessment which is going to be undertaken by the governing council in its full independence um coming to the question about what to do for what macro instruments are available for capital market union now we we certainly the esrb support the initiative to create a to create a capital market union in europe now it and we are in favor of diversifying the various sources of financing but we'll also be mindful that policy makers need to have the instruments to prevent and mitigate the new systemic risks that would arise generally in a capital market union more specifically as i was saying in my introductory statement in the known banking shadow the shadow banking sector known banking sector with such an extraordinary growth that this sector has had and will continue to have we haven't discussed much about fintech before but the fintech development is closely linked to developments in the known banking sector primarily so there will have to be uh there will have to be macro instruments there as well now with amongst the various things we see that there is a review of the esa regulation and there is a on-site strengthening of the esma so we continue to focus on this and certainly our attention will continue to be high on this on this point there are of course various measures that will limit the capacity to incur into new debt so mostly based on the demand side of the macro proof which seems also suitable for addressing some of the macro prudential problems that may arise in the future in the known in the shadow banking sector coming to the questions about the question about cyber attacks yes cyber attacks should do deserve the highest priority cyber security and there is now full awareness that this may be the most important problem is the most important problem that our authorities face in the last g7 meeting of finance ministers there was explicit attention given to this point various groups by the way the problem is being addressed now and discussed in practically all international fora it's being discussed of course by the ecb it's also being addressed and discussed by the national competent authorities more specifically addressed in your point on stress testing banks for cyber security that's very important it's being done currently by the bank of england we are sampling now about the various initiatives that are being taken by the national central banks or the national competent authorities for supervision in the euro area and we'll move on this ground certainly it is something that it's fully that fully fledged that that fully pertains to the stress testing area so i completely i completely agree with this point on the location policy as i said before it's very difficult for us to say what is the best final agreement that we can that the various parties will will find as we are not party to this agreement we are of course at disposal to give our advice what is essential for us and it's in the end whatever agreement is being reached what is essential for us is that we have serious powers of oversight and supervision over activity of clearing in euros and activities that may have financial stability implications for the euro area and i will stop here what about the npl in Greece you didn't answer my question you didn't answer my question it remains so so the amount of money remaining for yeah right no i answered your question because when i said that Greece was not discussed frankly i have no idea what you want to do with that okay thank you very much i can give you i can okay thank you very much this is a hearing on esrb issues of course philippe lombards i don't see him actually okay barbara cappell thank you her position yes thank you very much chairman president druggie well you mentioned the EU shadow banking monitoring and you talked about the international interconnections and the large amounts of assets that the shadow banks are sitting on in the euro shadow banking monitoring report we've seen that there are problems with the data coming from china the latest available data is from 2010 i was wondering if you could tell us if the Chinese authorities are working together with the fsb and the esrb as well this information is important for the monitoring are they providing this information or are you having to go to third parties where can you get the data from a second series of questions i'd like to put to you is linked to the esrb's report on from 2016 on macro prudential supervision there were three countries which had no market super supervisory bodies italy was one of those is back in september 2016 there were no implementing regulations for that i was wondering if there was a now a time frame for the implementing regulations for italy and also wanted to know what your priorities are in terms of macro supervision of italy thank you marco valley yes thank you very much i've got a question for you president dragy on the srb and that is the european self bond safe bond that may put us in a situation of moving out of quantitative easing and the issue with interest rates now of course it will cause a problem of sovereign debt in some countries including italy now these aren't euro bonds these instruments they are something that don't have the solidarity issue for countries who might be at risk so there would be different trashes divided up between the member states when it comes to the securitization so i think that we would see a real difference between central countries and those more on the periphery and then there would also be the weighting of the risk in the eurozone countries and the bank balance now the the securities are risk free so what do you think about this as an instrument is it the only instrument that is being discussed at the moment when it comes to the division and the sharing of the risk because it doesn't really mean that the debt would be sustainable at european level then so what do you have to say about that thank you thank you chairman mr dragey in the presentation you've just given the last item was the real estate market i'd like to comment on that the demand for real estate and for loans has grown at the beginning of the year the esrb commented on this and said that it did not see any danger for a real estate bubble i read that position but the international monetary fund responded that they had serious concerns that the real estate market could become overheated and that people taking out loans could get into trouble if interest rates rise andres dombert held an event recently in frankfort and said that the traffic light is clearly on orange and it's clear that there are excesses in the big cities so i'd like to know what the esrb's assessment is of these development not just in germany but in other regions in relation to the real estate market i mean thank you last question honas fernandez thank you very much chair and thank you president dragey for being here with us two questions very brief ones the first of these is on the question that was put earlier by my colleague pervange peres and that was on current negotiations of the curatization estes that is something that we are negotiating on with the council there is a text that includes the possibility of macro prudential supervision of these curatees markets and the responsibility to the esrb to review the risk retention in those countries where it may arise i wanted to ask you about that whether you think the board is in a position to carry out that task and then the second question refers to what was mentioned earlier about the non-performing loans in the greek case but on the board i think that there is a working group looking at a european response to non-performing loans and i would like to ask you then how that work is developing thank you very much i will respond to the questions in hopefully in the order they were asked on china the chinese china government didn't give the supply certain data to the fsb and we are not relevant for that we only have u data on italy the law in italy has been passed and the italian government now is in the process of issuing the relevant regulation on esbis the esrb has a task force where the esrb actually has structured the discussion initiated the discussion of esbis there is a task force chaired by the governor of the central bank of ireland governor philip lane esbis is to say to say really in in very very sort of perhaps to succinct words is a proposal where bonds would be pulled and trunched but it doesn't imply any joint liability in this sense it's not a substitute for a euro bond of any sort it's just different and so with respect to this the ecb not the srb the ecb governing council has taken note and i would say it's really too early to conclude to conclude in one sense or another about about this concept we we we do believe that the whole work would be finished by year end by november if i'm not mistaken for a final report a question of residential real estate um residential real estate is prices house prices have gone up especially in large cities in germany but also the netherlands also in austria also in various various other countries and esrb has issued warnings to this extent and warnings that we've discussed by the way in the last hearing we had um when we look at prices across countries of so we move beyond large cities and we try to see whether there's an average a heating in general of the real estate sector in the countries we find that we still find that the averages are more or less on the historical averages so we don't see a special heating of a systemic nature we can see heating in localized markets but not necessarily in a systemic uh on a systemic basis let me also add that while we see house prices going up we don't see credit developing at the same rhythms or even much or even rhythms that are comparable with what they had before the crisis in other words mortgages and lending it's still at a fairly normal pace so we see prices going up but we don't see leverage going up associated with with that however there are also also with respect to that there are local situations where this uh where this happens actually where for example we have in some in one country especially that can remember the many many real estate owners real estate owners are now in a negative equity situation where their debt is bigger than the value of their houses with the recovery of house prices these people will be in a better position of course and overall financial stability will be improved the um the um the finally on securitization uh on securitization the uh certainly I do believe that the board of the general board of the SRB is in a position to undertake a review of the macro prudential instruments in the securitization area uh so and the um final oh by the way it's important we follow the the discussions being held in the in the part in the European Parliament about securitization and we by and large dcb agrees with what's being said we only uh suggest special care about raising the risk retention uh the risk retention ratios because as we want to reintroduce this instrument for the financing of the real economy we think that the features of the instruments being discussed are safe enough as as they are too high retention uh retention shares retention risk retention shares threatened to hamper the spreading and the success of the instruments itself um on npls exactly as in the case we were discussing before for addressing a resolve in the npls the actions that are foreseen in the program in Greece that see action by the banks themselves in their risk management and their debt recovery procedures by the government first and foremost in ensuring an environment that is conducive to disposal of the npls um by the uh in general by the by changes in judicial processes out of court settlements and all so there's a long list of actions that makes one conclude that the creation of an asset management company is certainly useful but it's not going to be the number one solution for all the problems at national level equally so at european level so we look with great interest at these developments but we shouldn't have any um any confidence that this is going to be enough by itself all the other actions which often are painful actions are actually the necessary ones to address this problem thank you thank you very much so we can conclude also this second hearing has been as always very useful and interesting so i would like to thank uh president dragy for having been here for a very long session very intense but very uh positive and useful for our work and our constant dialogue thank you very much