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Mr Mersch says: “Over the course of the crisis, the ECB acted decisively and in line with its mandate. Change was mandatory and the path we chose is helping the euro area economy to return to growth and price stability. But interest rates can only stay very low over the short term. The longer they remain low, the more pronounced the negative side effects will become.
“So far, we do not see any developments that could give rise to major concern. The positive impact on the economy outweighs any drawbacks there may be. But we need to be mindful, even as the upsides of our monetary policy prevail, because of the multi-pronged approach of our unconventional, and by definition temporary, monetary policy.”
ECB‘s unprecedented policy reaction to the crisis has clearly added to the list of challenges banks are facing today. But what ECB did was necessary to preserve price stability in the euro area, which is what ECB has been mandated to do. As such, ECB is fully aware of the crucial role banks play in transmitting monetary policy to the real economy. That is why ECB pays close attention to how banks are coping with all the challenges they face.
The banking union marks a significant change in the euro area financial system and it comes with a series of one-off adjustments for banks. Unlike the banking union though, ECB‘s monetary policy measures lead to constant adjustments by the banking sector, especially the longer the current measures stay in place. It is therefore in everybody's interest to ensure that ECB can leave this period of low interest rates behind sooner rather than later. But it's not solely the responsibility of the ECB. It will also require courageous, far-sighted and sensible action by other policymakers to bring the euro area back to sustainable growth. May they choose wisely.