Thank you very much for the invitation to this year's seminar on Financial Stability, organised jointly by the National Bank of Romania and the International Monetary Fund. It is a great honor for me to speak to you today, and I regret that I cannot attend this meeting in person.
14 years have passed since this seminar was held for the first time. 14 years during which the integration of financial markets in Europe has proceeded, 14 years during which a lot of institution-building has taken place across Europe, not least in the domain of financial stability and macroprudential policy. Europe, one could argue, is a front-runner in macroprudential policy coordination.
A functioning macroprudential framework is all the more important at the current juncture. We are in the midst of a process of socio-economic transformation, which requires strong financial markets and safeguards against excessive risk-taking. A sound micro- and macroprudential framework helps with mastering these challenges. In Europe, this framework is based on the supervision of significant banks within the Single Supervisory Mechanism (SSM) by the European Central Bank (ECB), national responsibilities for financial stability and supervision of less significant institutions, and the coordination of macroprudential policy under the umbrella of the European System Risk Board (ESRB). This framework balances responsibilities at the supranational and the national level.
While this framework is still relatively new, it has worked well so far. While severe shocks hit the economy over the past years, the European financial system and its banks have weathered these storms. Decisive policy action by fiscal and monetary authorities has certainly played a role, but European banks have also become more resilient over the past decade.
Going forward, these achievements need to be consolidated and the system needs to be prepared for a changing environment. Strong micro- and macroprudential policies are the foundation of a resilient financial system. Microprudential policy ensures the safety and soundness of individual financial institutions; macroprudential policy addresses the build-up of systemic-wide vulnerabilities. Both complement monetary policy by shielding it from the risk of financial dominance.