Live replay of EP Committee on Economic and Monetary Affairs: Monetary Dialogue with Mario DRAGHI, President of the European Central Bank

Brussels

meeting

European Central Bank

DRAGHI, Mario (IT)

monetary dialogue with the ECB (T)

Committee on Economic and Monetary Affairs

(03) EP Committee on Economic and Monetary Affairs: Monetary Dialogue with Mario DRAGHI, President of the European Central Bank (15:17 - 15:22)

SOUNDBITE (English), Mario DRAGHI, President of the European Central Bank, Let me now turn to the topic of TARGET balances. TARGET2 is the Eurosystem&rsquo;s real-time gross settlement system, through which payments in euro can be safely and efficiently processed between banks, both within and across borders. It provides a state-of-the-art payment infrastructure that is used to settle, in central bank money, payments related to a wide variety of transactions, including monetary policy operations, financial market instruments, and interbank and customer payments. Last year, TARGET2 processed a daily average of about 342,000 payments, representing a daily average value of &euro;1.7 trillion. It therefore plays a key role in ensuring the smooth conduct of monetary policy, the correct functioning of financial markets and banking, and financial stability.

SOUNDBITE (English), Mario DRAGHI, President of the European Central Bank, By supporting financial integration and the implementation of our monetary policy, TARGET2 represents a cornerstone of our monetary union. In the TARGET2 system each Eurosystem national central bank (NCB) has a debtor or creditor position (a balance) vis-&agrave;-vis the ECB, which keeps track of the money entering and leaving each participant country for accounting purposes. The TARGET balances of individual NCBs therefore merely reflect the settlement of cross-border payments executed via TARGET2. Payments undertaken as part of the asset purchase programme are also settled via TARGET2. APP implementation is distinct from that of refinancing operations because it can entail immediate cross-border payments. Indeed, around 80% of total NCBs&rsquo; purchases have been by financial market parties that are not resident in the same country as the purchasing central banks, thereby impacting TARGET balances.

SOUNDBITE (English), Mario DRAGHI, President of the European Central Bank, Moreover, the sellers of the assets purchased under the APP can reinvest the proceeds, inducing a cross-border rebalancing of their portfolio. This phenomenon, referred to as international portfolio rebalancing, can prompt further changes in TARGET balances, following the same logic I have just outlined. All this notwithstanding, we have seen TARGET2 has been instrumental in the smooth pass-through of our monetary policy measures to the financing conditions of households and businesses.

SOUNDBITE (English), Mario DRAGHI, President of the European Central Bank, Let me conclude. The EU Treaties gave the ECB the primary objective of maintaining price stability in the euro area as a whole. This is the best contribution we can make to the welfare of our fellow citizens. Ensuring price stability is a precondition for the euro area economy to achieve a balanced growth path that can be sustained in the long run. But this is not the only condition. Achieving a balanced growth path also requires to strengthen the euro area ability to deal with risks, whenever they will materialise. The current economic outlook provides a unique opportunity to reduce the likelihood of severe shocks by strengthening the economic structures of Member States, with policy actions both on the fiscal and structural side.

SOUNDBITE (English), Mario DRAGHI, President of the European Central Bank, At the same time, boosting the resilience of the Economic and Monetary Union (EMU) implies also reinforcing our common institutional set-up so as to prevent and manage shocks. I thus welcome the European Parliament&rsquo;s role in such discussions and the renewed efforts by euro area leaders and ministers to tackle the issue, as reflected in, for instance, the recent Eurogroup meeting. It is in this spirit that I look forward to the upcoming Euro Summit meeting on EMU governance. Thank you for your attention. I am at your disposal for questions.