The financial system plays a central role in transmitting monetary policy to the real economy.[1] Whenever a central bank adjusts its policy instruments, it relies on private financial intermediaries to translate the monetary impulse into the financing conditions for firms and households. In today’s speech, I will discuss how this process is shaped by the structure of the financial system and, specifically, by the relative importance of bank versus non-bank finance in the economy.

This question is motivated by the pronounced rise in non-bank financial intermediation in the euro area, especially after the global financial crisis. Non-bank financial intermediaries now make up a much larger share of the financial system than they did in the early years of our common currency. Likewise, a growing number of firms resort to market finance to satisfy their demand for credit. For central banks, it is therefore crucial to understand whether and how these developments matter for...

Carolyn Rogers, Secretary General of the Basel Committee on Banking Supervision, talks about the complexity of global standards, Europe’s role in the Basel Committee and why Basel III should be implemented sooner rather than later.

Full interview

Carolyn Rogers, Secretary General of the Basel Committee on Banking Supervision, talks about the complexity of global standards, Europe’s role in the Basel Committee and why Basel III should be implemented sooner rather than later.

Full interview

Carolyn Rogers, Secretary General of the Basel Committee on Banking Supervision, talks about the complexity of global standards, Europe’s role in the Basel Committee and why Basel III should be implemented sooner rather than later.

Full interview

Carolyn Rogers, Secretary General of the Basel Committee on Banking Supervision, talks about the complexity of global standards, Europe’s role in the Basel Committee and why Basel III should be implemented sooner rather than later.

Full interview

21. August 2021

Frau Schnabel, wenn Sie die Bilder von der Hochwasserkatastrophe in Deutschland oder den Waldbränden in Griechenland sehen: Ist das für Sie ein Zeichen, dass auch die EZB etwas gegen den Klimawandel tun sollte?

Für mich waren die jüngsten Ereignisse eine Bestätigung, dass wir mit unserer neuen Strategie das Richtige tun. Wir haben erst kürzlich entschieden, den Klimaschutz stärker in unserer Geldpolitik zu berücksichtigen. Der Klimawandel ist die größte Herausforderung des 21. Jahrhunderts. Extremwetterereignisse, wie wir sie zuletzt erlebt haben, werden wir in Zukunft leider noch häufiger sehen.

Warum aber ist das ein Thema für eine Zentralbank?

Der Klimawandel hat tiefgreifende Auswirkungen auf die wirtschaftliche Entwicklung und damit auf die Preisstabilität – das ist also unser Kerngebiet. Beispielsweise setzt er die Wirtschaft häufiger makroökonomischen Schocks aus, dies beeinflusst das Wachstum und die Inflation.

...

21 August 2021

Ms Schnabel, do you see the images of the catastrophic floods in Germany or the forest fires in Greece as a sign that the ECB should also do something to counter climate change?

For me, the latest events have confirmed that we are doing the right thing with our new strategy. Only recently we decided to give more consideration to climate protection in our monetary policy. Climate change is the greatest challenge of the 21st century. Unfortunately, we will likely see extreme weather events, such as those we have just experienced, more frequently in future.

But why is that a topic for a central bank?

Climate change has far-reaching effects on economic developments and therefore also on price stability – which is our main task. For example, it exposes the economy to more frequent macroeconomic shocks, which has an impact on growth and inflation.

Critics say that it is up to governments to respond to that, not the ECB…

Of...

Carolyn Rogers, Secretary General of the Basel Committee on Banking Supervision, talks about the complexity of global standards, Europe’s role in the Basel Committee and why Basel III should be implemented sooner rather than later.

Full interview

Current account recorded €22 billion surplus in June 2021, up from €14 billion in previous month Current account surplus amounted to €316 billion (2.8% of euro area GDP) in 12 months to June 2021, up from €235 billion (2.0%) one year earlier In financial account, euro area residents’ net acquisitions of non-euro area portfolio investment securities totalled €953 billion and non-residents’ net acquisitions of euro area portfolio investment securities totalled €54 billion in 12 months to June 2021

Frankfurt am Main, 19 August 2021

Today, I will explain the revision to the Governing Council’s rate forward guidance that we announced in our latest meeting. This should be viewed as a fundamental step in implementing our new monetary policy strategy, since it is essential that our approach to setting our policy rates is fully aligned with delivering our symmetric two per cent inflation target over the medium term.

Forward guidance on the path of interest rates is an effective tool to steer interest rate expectations.[1] In particular, state-contingent formulations of forward guidance provide a powerful automatic stabilisation mechanism.[2] In one direction, should the inflation outlook improve more than anticipated, the expected time horizon to the first increase in interest rates automatically shortens. In the other direction, if there were setbacks to the inflation outlook, the time to lift-off would automatically lengthen. In general, the systematic approach...

Carolyn Rogers, Secretary General of the Basel Committee on Banking Supervision, talks about the complexity of global standards, Europe’s role in the Basel Committee and why Basel III should be implemented sooner rather than later.

Full interview

Data for debt securities issued by euro area FVCs

The outstanding amount of debt securities issued by euro area FVCs was €1,607 billion at the end of the second quarter of 2021, €12 billion higher than at the end of the previous quarter. Over the same period, transactions amounted to a net issuance of €17 billion (see Chart 1). The annual growth rate of debt securities issued, calculated on the basis of transactions, decreased to 3.8% in the second quarter of 2021, from 4.0% in the previous quarter.

Euro area FVCs' holdings of securitised loans – accounting for most of the assets backing the debt securities issued – decreased to €1,243 billion at the end of the second quarter of 2021, from €1,266 billion at the end of the previous quarter. The change was accounted for by both adjustments and net disposals of €27 billion (see chart 2). Net disposals of securitised loans originated by euro area monetary financial institutions (MFIs) amounted to €23 billion.

Data for weighted average rate for unsecured wholesale sector borrowing

In the fourth maintenance period of 2021, which started on 16 June 2021 and ended on 27 July 2021, the borrowing turnover in the unsecured segment averaged €117 billion per day. The total borrowing turnover for the period as a whole was €3,522 billion. Borrowing from credit institutions, i.e. on the interbank market, represented a turnover of €356 billion, i.e. 10% of the total borrowing turnover, and lending to credit institutions amounted to €194 billion. Overnight borrowing transactions represented 65% of the total borrowing nominal amount. The weighted average overnight rate for borrowing transactions was -0.56% for the interbank sector and -0.55% for the wholesale sector, compared with -0.57% and -0.55% respectively in the previous maintenance period.

Money market funds are presented separately in this statistical release since they are classified in the monetary financial institutions sector within the European statistical framework. Hyperlinks in the main body of the statistical release and in annex tables lead to data that may change with subsequent releases as a result of revisions. Figures shown in the annex table are a snapshot of the data as at the time of the current release.

New issuances of debt securities by euro area residents totalled EUR 778.2 billion in June 2021. Redemptions amounted to EUR 651.8 billion and hence net issues to EUR 126.4 billion. The annual growth rate of outstanding debt securities issued by euro area residents decreased from 5.3% in May 2021 to 4.3% in June.

Data for debt securities

Prepared by Linda Fache Rousová, Angelica Ghiselli, Maddalena Ghio and Benjamin Mosk

Published as part of the ECB Economic Bulletin, Issue 5/2021.

Retirement provision in euro area countries typically consists of three pillars: government sponsored pay-as-you-go plans (pillar 1), occupational (funded) pension schemes (pillar 2) and private pensions/life insurance (pillar 3). The latter two receive contributions from either employers or employees, providing an important supplement to pillar 1 in some euro area countries, notably the Netherlands, where occupational pension fund assets exceed 200% of GDP.

With over €10 trillion of total assets, the portfolio allocation of insurance corporations and occupational pension funds (ICPFs) can have a significant impact on financial markets. This box focuses on occupational pension funds and life insurers, as these play an important role in providing long term capital to the economy and contribute to the...

Prepared by Philip Muggenthaler, Joachim Schroth and Yiqiao Sun

Published as part of the ECB Economic Bulletin, Issue 5/2021.

While the coronavirus (COVID-19) pandemic has been a common shock, its economic impact has been heterogenous across countries. This box describes how activity and demand have been affected in the euro area countries since the start of the pandemic and highlights some elements which may help to explain the heterogeneous performance across countries. It also points out the risks of persistent divergences and the important role of the Next Generation EU plans in reducing them. Differences across euro area countries include the degree of containment measures in response to the varying intensity of the health crisis, the different sectoral compositions and economic structures, and the quality of institutional settings. As fiscal support has been proportional to the depth of the health crisis, fiscal positions in euro area countries...

Sources: Refinitiv, IBES and ECB calculations.Notes: EPS stands for earnings per share. This chart shows the price and the earnings forecast 12 months ahead for the Dow Jones EURO STOXX broad index. The latest observations are for 17 May 2021.

The new monetary policy strategy of the European Central Bank (ECB) was published on 8 July 2021. While the mandate is conferred upon the ECB by the Treaties, the ECB has to devise its monetary policy strategy. This strategy sets out how to achieve the primary objective of maintaining price stability in the euro area, referring to an appropriate set of monetary policy instruments, indicators and intermediate targets, as well as how to take into account other considerations without prejudice to price stability. A monetary policy strategy serves two main purposes: first, it provides policymakers with a coherent analytical framework that maps actual or expected economic developments into policy decisions; second, it serves as a vehicle for communicating with the public. The ECB’s monetary policy strategy was last reviewed in 2003 and the changes that have since occurred to the economic and financial backdrop as well as to the predominant policy challenges warranted an update....

Prepared by Gerrit Koester, Ieva Rubene, Eduardo Gonçalves and Jakob Nordeman

Published as part of the ECB Economic Bulletin, Issue 5/2021.

Pronounced rises in input costs on a global level have led to marked increases in import and producer prices for intermediate goods in the euro area (Chart A). Surging commodity price inflation, substantial increases in shipping costs and insufficient supply of some raw materials and intermediate products have led to input cost pressures for the euro area.[1] Such input cost shocks create “pipeline” price pressures at the early stages of the production and distribution chain. Recent developments in input costs have pushed up core producer prices (essentially producer prices in the manufacturing sector), in which intermediate goods have a large weight, with the latter reflecting price increases observed for, especially, basic metals, chemicals and chemical products. How much of these pressures ultimately feeds through...

At the global level, the recovery momentum remains solid amid continued supply constraints. The Purchasing Managers’ Index data for June show historically high levels for the second quarter of 2021 as a whole. At the same time, the growth momentum slowed somewhat in June because activity normalised to some extent in several key economies. Trade in goods remains robust despite increasing headwinds from supply bottlenecks. With respect to global inflation developments, price pressures increased further, driven largely by transitory factors such as base effects and pandemic-related supply constraints. Looking ahead, pandemic developments continue to be a source of uncertainty for the global economic recovery and may lead to an increasingly uneven growth path across countries.

The euro area economy rebounded in the second quarter of the year and, as restrictions are eased, is on track for strong growth in the third quarter. More and more people are getting vaccinated, and...