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SPEECH
19 November 2024
Naturally accounting for nature
Destroying nature means destroying the economy, says Executive Board member Frank Elderson. Nature preservation is the responsibility of elected governments, but accounting for nature-related risks is vital for central banks and supervisors in the pursuit of their mandate.
Read the speech
THE ECB BLOG
19 November 2024
Assessing transition risks
We need a resilient financial sector to achieve a carbon-neutral EU by 2050, says Vice-President Luis de Guindos. That is why we tested the EU financial system's resilience to green transition stresses.
Read The ECB Blog
FINANCIAL STABILITY REVIEW
19 November 2024
Implications of passive investment
A shift from active to passive investing in equity markets over the past decade could have financial stability implications, as it can make these markets more volatile, a preview of our Financial Stability Review shows.
Read the preview- 19 November 2024
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 19 November 2024
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 19 November 2024
- PRESS RELEASERelated
- 19 November 2024
- FAQ
- 19 November 2024
- THE ECB BLOG
- 19 November 2024
- BALANCE OF PAYMENTS (MONTHLY)
- 14 November 2024
- MONETARY POLICY ACCOUNTRelated
- 17 October 2024
- MONETARY POLICY DECISIONEnglishOTHER LANGUAGES (23) +
- 12 November 2024
- WEEKLY FINANCIAL STATEMENTEnglishOTHER LANGUAGES (22) +Annexes
- 12 November 2024
- WEEKLY FINANCIAL STATEMENT - COMMENTARY
- 19 November 2024
- Speech by Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, at the tenth Green Finance Forum “Innovate in Nature”
- 18 November 2024
- Speech by Christine Lagarde, President of the ECB, at "Les Essentiels des Bernardins", Paris
- 18 November 2024
- Speech by Philip R. Lane, Member of the Executive Board of the ECB, at the SUERF Marjolin Lecture hosted by the Banca d’Italia
- 18 November 2024
- Speech by Luis de Guindos, Vice-President of the ECB, at the Frankfurt Euro Finance Week, organised by the dfv Euro Finance Group
- 16 November 2024
- Speech by Ms Schnabel, Member of the Executive Board of the ECB, at the Chicago Booth Conference on the Global Economy and Financial Stability, in London, UKRelated
- 31 October 2024
- Interview with Christine Lagarde, President of the ECB, conducted by Eric Albert, Philippe Escande and Béatrice Madeline on 28 October 2024
- 29 October 2024
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Domenico Conti
- 8 October 2024
- Interview with Frank Elderson, Member of the Executive Board of the ECB and Vice-Chair of the Supervisory Board of the ECB, conducted by Miha Jenko
- 20 September 2024
- Interview with Luis de Guindos, Vice-President of the ECB, conducted by Gonçalo Almeida on 13 September
- 4 September 2024
- Interview with Piero Cipollone, Member of the Executive Board of the ECB, conducted by Eric Albert
- 19 November 2024
- Meeting the EU’s climate neutrality targets calls for deep structural changes and significant private funding, requiring a healthy financial system. That’s why we’ve tested how resilient banks, investment funds and insurers are to stresses arising during the green transition. ECB Vice-President Luis de Guindos explains the findings.
- 14 November 2024
- The Eurosystem has started to reduce its bond holdings. This ECB Blog post investigates how strongly the shrinking balance sheet affects long-term interest rates. Estimates based on the Survey of Monetary Analysts suggest: an expected €1 trillion reduction in bond holdings may raise long-term risk-free interest rates by about 35 bps.Details
- JEL Code
- E50 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→General
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 12 November 2024
- Complacency in fighting climate change and preserving biodiversity is endangering our economic survival. The longer we wait, the higher the costs will be. Christine Lagarde, President of the European Central Bank, warns of the growing gap between the commitments made and the investment needed.
- 1 November 2024
- As they juggle various cards, apps and devices, most Europeans find that digital payments have fallen short of their promise to provide a convenient euro area-wide solution. The ECB’s Piero Cipollone explains how a digital euro would blend the simplicity of cash with digital convenience.EnglishOTHER LANGUAGES (15) +
- 24 October 2024
- People have tended to be quite hesitant to trust banks abroad. That seems to be changing. The ECB Blog shows that cross-border bank deposits of private households have picked up recently.
- 20 November 2024
- WORKING PAPER SERIES - No. 2477Details
- Abstract
- This paper demonstrates that empirically grounding the discount factor significantly influences the determination of the carbon price. Using two complementary nonlinear statistical approaches, we assess which utility formulations and corresponding stochastic discount factors best align with U.S. data. We provide evidence that habit formation is essential for capturing the time variation in the stochastic discount factor necessary to match the data. This increased time variation raises the carbon price by 32% and makes it five times more procyclical compared to standard models. The heightened procyclicality reduces aggregate risk, the risk premium, and the need for precautionary savings.
- JEL Code
- Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
- 19 November 2024
- OTHER PUBLICATIONAnnexes
- 19 November 2024
- ANNEX
- 19 November 2024
- FAQRelated
- 19 November 2024
- PRESS RELEASE
- 19 November 2024
- THE ECB BLOG
- 19 November 2024
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2024Details
- Abstract
- The continuing shift from active to passive investing in equity markets over the past decade raises questions about the implications for financial stability along three dimensions. First, empirical evidence suggests that passive investing may increase co-movement among stock returns, making markets more volatile. Second, passive funds may increase equity market concentration, potentially exposing investors to heightened idiosyncratic risks from the largest companies. And third, the ability of equity markets to absorb shocks may be inhibited by the growing concentration of liquidity at closing auctions impacted by passive investing. In summary, passive investing continues to provide benefits to individual investors but might also adversely affect market functioning, thus highlighting the importance of investor heterogeneity.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
- 18 November 2024
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2024Details
- Abstract
- Productivity growth in the euro area has been declining for several decades. In light of the importance of bank lending as a source of external funding for euro area firms, this special feature investigates the link between firm productivity and bank credit allocation. Bank credit in the euro area has been skewed towards sectors that have contributed only marginally to aggregate productivity growth, such as real estate. Additionally, bank loans tilted towards less-productive firms within the same sectors during the COVID-19 pandemic, supported by state credit guarantees. Banks with weaker balance sheets lent more to less-productive firms during this period than other banks did. The tilt towards less-productive firms could have an indirect effect on aggregate productivity if the survival of less-productive firms suppresses the profitability of more-productive competitors, discouraging market entry and investment. A more diversified external funding structure could help boost the productivity of euro area firms, to the benefit of financial stability.
- JEL Code
- D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 15 November 2024
- LETTERS TO MEPS
- 15 November 2024
- OCCASIONAL PAPER SERIES - No. 361Details
- Abstract
- Since the March 2023 banking turmoil, a policy debate has emerged concerning the unprecedented scale and speed of the observed deposit outflows. Have recent stress episodes and developments in technology structurally changed depositors’ behaviour? Are the Basel III liquidity coverage ratio (LCR) run-off assumptions for cash outflows still fit for purpose? Leveraging on monthly liquidity reporting for a sample of 110 significant institutions (SIs) between 2016 and 2024, we shed light on some stylised facts pertaining to the composition of deposit flows in the banking union. Overall, we find limited evidence of a structural change in the statistical behaviour of deposit flows to date. For all but one of the deposit classes included in the analysis, more than 90% of observable net outflows remained below the LCR run-off assumptions during the whole sample period. Some extreme deposit outflows recorded during the COVID-19 pandemic and for a few SIs assessed as failing or likely to fail (FOLTF) remain rare tail events for which the LCR standard was not designed.
- JEL Code
- G20 : Financial Economics→Financial Institutions and Services→General
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 14 November 2024
- LEGAL ACT
- 14 November 2024
- LEGAL ACT
- 14 November 2024
- WORKING PAPER SERIES - No. 3001Details
- Abstract
- Contractions in credit supply can lead firms to reduce their level of employment, yet little is known about how these shocks affect the composition of firms’ employees and outcomes at the worker level. This paper investigates how bank distress affects credit provision and its effects on employment beyond firm-level aggregates. To do so, we use a novel dataset built from administrative and tax records linking all banks, firms, and workers in Denmark. We show that banks that were particularly exposed to the 2008-09 financial crisis cut lending to firms, and firms were unable to fully compensate with financing from alternate sources. The decrease in credit supply led to a drop in firm-level employment, with effects concentrated among firms with low pre-crisis liquidity, and on employment of low-educated and nonmanagerial workers. At the worker level, we find that positive effects on unemployment were driven by effects on low-educated, non-managerial and short-tenured workers. Our estimates suggest that cuts in bank lending can account for at least 5% of the fall in employment of low-educated workers in our sample, and are an important factor behind heterogeneous employment dynamics in times of contractionary credit.
- JEL Code
- E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
J23 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Demand
- 14 November 2024
- WORKING PAPER SERIES - No. 3000Details
- Abstract
- This paper documents the extension of the system-wide stress testing framework of the ECB with the insurance sector for a more thorough assessment of risks to financial stability. The special nature of insurers is captured by the modelling of the liability side and its loss absorbing capacity of technical provisions as the main novel feature of the model. Leveraging on highly granular data and information on bilateral exposures, we assess the impact of liquidity and solvency shocks and demonstrate how a combined endogenous reactions of banks, investment funds and insurance companies can further amplify losses in the financial system. The chosen hypothetical scenario and subsequent simulation results show that insurers’ ability to transfer losses to policyholders reduces losses for the entire financial sector. Furthermore, beyond a certain threshold, insurance companies play a crucial role in mitigating both direct and indirect contagion.
- JEL Code
- D85 : Microeconomics→Information, Knowledge, and Uncertainty→Network Formation and Analysis: Theory
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
L14 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Transactional Relationships, Contracts and Reputation, Networks
- 14 November 2024
- OCCASIONAL PAPER SERIES - No. 360Details
- Abstract
- As digital payments become increasingly popular, many central banks are looking into the issuance of retail central bank digital currency (CBDC) as a new central bank monetary liability in addition to banknotes and commercial bank reserves. CBDC will have broadly the same balance sheet and profit implications as the issuance of banknotes. While the decision to issue CBDC is often thought to likely increase the size of central banks’ balance sheets, the net impact of digitalisation on balance sheet size could also be negative, as the number of banknotes in circulation may decline and CBDC’s design features could limit its take-up as a store of value. We use scenario analyses to illustrate the key drivers of the impact of CBDC on central bank profitability, with the part of CBDC that does not derive from an exchange of banknotes being an important factor. The financial risk implications of CBDC for central banks can be managed via well-established frameworks and relate primarily to the impact on balance sheet size and asset composition. The paper concludes with a discussion on how the profit and risk channels affect central bank capital.
- JEL Code
- E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
- 8 November 2024
- WORKING PAPER SERIES - No. 2999Details
- Abstract
- In 1936, John Maynard Keynes proposed that emotions and instincts are pivotal in decision-making, particularly for investors. Both positive and negative moods can influence judgments and decisions, extending to economic and financial choices. Intuitions, emotional states, and biases significantly shape how people think and act. Measuring mood or sentiment is challenging, but surveys and data collection methods, such as confidence indices and consensus forecasts, offer some solutions. Recently, the availability of web data, including search engine queries and social media activity, has provided high-frequency sentiment measures. For example, the Italian National Statistical Institute’s Social Mood on Economy Index (SMEI) uses Twitter data to assess economic sentiment in Italy. The relationship between SMEI and financial market activity, specifically the FTSE MIB index and its volatility, is examined using a trivariate Vector Autoregressive model, taking into account the impact of the COVID-19 pandemic.
- JEL Code
- C1 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
G4 : Financial Economics
- 8 November 2024
- WORKING PAPER SERIES - No. 2998Details
- Abstract
- During the COVID-19 pandemic, governments in the euro area sharply increased spending while the European Central Bank eased financing conditions. We use this episode to assess how such a concerted monetary-fiscal stimulus redistributes welfare between various age cohorts. Our assessment involves not only the income side of household balance sheets (mainly direct effects of transfers) but also the more obscure financing side that, to a substantial degree, occurred via indirect effects (with a prominent role of the inflation tax). Using a quantitative life-cycle model, and assuming that the deficit was partly unfunded by future taxes, we document that young households benefited from the stimulus, while middle-aged and older agents mainly paid the bill. Crucially, most welfare redistribution was due to indirect effects related to macroeconomic adjustment that resulted from the stimulus. As a consequence, even though all age cohorts received significant transfers, the welfare of some actually decreased.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
H5 : Public Economics→National Government Expenditures and Related Policies
J11 : Labor and Demographic Economics→Demographic Economics→Demographic Trends, Macroeconomic Effects, and Forecasts
- 8 November 2024
- LEGAL ACTEnglishOTHER LANGUAGES (16) +
- 8 November 2024
- LEGAL ACTEnglishOTHER LANGUAGES (16) +
- 8 November 2024
- LEGAL ACTEnglishOTHER LANGUAGES (16) +
- 7 November 2024
- WORKING PAPER SERIES - No. 2997Details
- Abstract
- We examine how agglomeration economies have influenced labour earnings in France over forty years. First, we define cities dynamically to account for their changing footprints. Our findings show that aggregate wage growth is mainly driven by growth in larger cities, rather than smaller ones or by population shifts across cities. We estimate individual wages incorporating time-varying city and individual fixed effects, and analyse how city characteristics (employment density, area, and market access) and their returns impact wage evolution. Changes in the values of these characteristics have minimal effect, but changes in their returns significantly influence wages, with notable variation across cities. Overall, aggregate wage growth in France reflects larger returns to larger city size. Our model, that incorporate the impact of agglomeration economies on city size and population, suggests that changes in returns do not drive population or area changes sufficiently to impact aggregate labour earnings, supporting our empirical findings.
- JEL Code
- R23 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Household Analysis→Regional Migration, Regional Labor Markets, Population, Neighborhood Characteristics
J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage Differentials
J61 : Labor and Demographic Economics→Mobility, Unemployment, Vacancies, and Immigrant Workers→Geographic Labor Mobility, Immigrant Workers
- 7 November 2024
- WORKING PAPER SERIES - No. 2996Details
- Abstract
- This paper investigates the interplay between discretionary fiscal policy and inflation in the euro area, emphasizing the role of public debt levels in modulating this relationship. It explores how fiscal expansions or contractions influence inflationary pressures, particularly under varying debt conditions. The analysis reveals that fiscal policy’s effect on inflation is non-linear, with debt levels significantly affecting the inflationary outcome of fiscal measures. High debt levels tend to amplify the inflation response to fiscal expansions, a finding that holds under multiple analytical frameworks and robustness checks. This paper contributes to the empirical literature by highlighting the critical role of fiscal policy, especially in high-debt environments, and its implications for inflation dynamics in the euro area.
- JEL Code
- E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
- 7 November 2024
- SURVEY ON THE ACCESS TO FINANCE OF ENTERPRISES IN THE EURO AREAAnnexes
- 7 November 2024
- SAFE QUESTIONNAIRE
Related- 7 November 2024
- PRESS RELEASE
Interest rates
| Marginal lending facility | 3.65 % |
| Main refinancing operations (fixed rate) | 3.40 % |
| Deposit facility | 3.25 % |
Inflation rate
More on inflationExchange rates
| USD | US dollar | 1.0578 | |
| JPY | Japanese yen | 162.71 | |
| GBP | Pound sterling | 0.83638 | |
| CHF | Swiss franc | 0.9329 |
Financial stability
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