Public Hearing with Mario Draghi, Chairman of the European Systemic Risk Board, at the Committee on Economic and Monetary Affairs, in the EP in Brussels. Statements by Michael THEURER (ALDE, DE), Mario DRAGHI, Chair of the European Systemic Risk Board, and Philippe LAMBERTS (Greens/EFA, BE).

Brussels

LAMBERTS, Philippe (Greens/EFA, BE)

public hearing

DRAGHI, Mario (IT)

Committee on Economic and Monetary Affairs

THEURER, Michael (ALDE, DE)

European Systemic Risk Board

Public Hearing with Mario DRAGHI, Chairman of the European Systemic Risk Board: extracts from the debate

SOUNDBITE (English), Mario DRAGHI, Chair of the European Systemic Risk Board, Macroprudential policy should pay closer attention to areas where systemic risk is higher. Therefore, the required level of resilience of specific parts of the financial system, such as investment funds, should be linked to their potential impact in terms of the systemic risk facing the financial system as a whole.

SOUNDBITE (English), Mario DRAGHI, Chair of the European Systemic Risk Board, The risks at the level of end borrowers, independently of the type of credit (i.e. bank loans, non-bank loans or marketable debt securities) should be addressed. This may make it necessary to develop the framework for leverage requirements for investment funds and also to make use of the new sources of data available under existing legislation.

SOUNDBITE (English), Mario DRAGHI, Chair of the European Systemic Risk Board, The first technical assessment based on our macro-stress calculations leads to the conclusion that 95% of the asset management firms and investment funds in our sample would be able to fully satisfy redemption claims in an &ldquo;extreme but plausible&rdquo; scenario.

SOUNDBITE (English), Mario DRAGHI, Chair of the European Systemic Risk Board, Stricter regulation means market-makers are better able to absorb losses under stressed market conditions, thereby increasing market resilience and reducing the risk of market disruptions in times of stress.

SOUNDBITE (English), Kay SWINBURNE (ECR, UK), Is the ESRB looking at whether Central Bank policy is increasingly introducing systemic risk into the financial sector, especially in the euro area?

SOUNDBITE (English), Mario DRAGHI, Chair of the European Systemic Risk Board, The decline in bank and insurance profitability is a risk and it&rsquo;s one of the main risks for the EU financial stability, especially in this environment of very low interest rates.

SOUNDBITE (German), Michael THEURER (ALDE, DE), The excess savings could be leading to a lack of profitable investment opportunities; do you think that there are risks linked to that for the financial sector? Not only for banks, but also for insurance companies, pensions and life insurances&hellip; they face serious problems with very low interest rates, both long and short term rates.

SOUNDBITE (English), Mario DRAGHI, Chair of the European Systemic Risk Board, Low interest rates are there for a reason, namely to foster recovery and return to growth to a growth that is robust (&hellip;) If this state of affairs were to last a long time, where would we look for the greater risk? Certainly the one category that&rsquo;s most exposed to this is the category of those financial intermediaries that are promising guaranteed fixed returns.

SOUNDBITE (English), Philippe LAMBERTS (Greens/EFA, BE), I&rsquo;d like to ask you about the risk of sustained very low inflation on financial stability. So we looked at the interest rate part but here is about the inflation rates so just imagine that it stays very low, what does that imply in terms of financial stability?

SOUNDBITE (English), Mario DRAGHI, Chair of the European Systemic Risk Board, Does low inflation have an impact on risk? Certainly yes, it does, it does and there is a possibility that households, corporates and sovereigns, that made their debt decisions years ago, against the background of 2% inflation rate, now they have a lower inflation rate to cope with. And so this means an upward pressure on real interest rates, a heavier debt burden for them.