‘How the Euro crisis has changed the ECB’s approach to monetary policy’ with Frank Smets, Director General, DG Research, ECB

On Monday October 15th, the Financial Services task force had the pleasure of welcoming Frank Smets, Director General, DG Research from the European Central Bank, who gave a presentation on the Euro crisis and how this has changed the ECB’s monetary policy.

The financial crisis has highlighted that threats to financial stability can have a tremendous influence on both monetary policy and fiscal policy. In particular, financial instability and weak public finances can have a negative impact on each other. The challenge faced by monetary policy in this environment is enormous and is testing the ability of the ECB to act as the central bank of a single monetary area. The biggest difficulty is to preserve the ‘singleness’ of the monetary policy and to ensure the proper transmission of this policy to the real economy throughout the currency area. To address this situation, the ECB has taken a number of non-standard measures. Frank Smets explained the ECB’s monetary policy strategy with both its standard and non standard measures. He also explained how the ECB has responded to stress based on the EMU Composite Index of Systemic Stress.


After his presentation the members of the British Chamber had the opportunity to ask Frank Smets any questions. The members asked questions on secured an unsecured lending, moral hazard, eurobonds, fiscal union, banking union and the grexit.

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