Synopsis of Training Day of the 6th ECB Simulation Conference
The Training Day serves as the inaugural day of the annual ECB Simulation Conference for university students, where distinguished representatives from institutions, businesses, and academia share their knowledge and experiences with the participants.
The Training Day for the 6th Conference took place at the Bank of Greece on December 9, 2022. The key topics of the Conference were:
- Monetary Policy Transmission Mechanism
- Inflation (Types, Forms, Components, Historical Data, and Forecasts)
- The interaction of Monetary and Fiscal Policies in a period of pandemic and geopolitical developments.
- Central Bank Digital Currency and Digital Euro.
The 6th Conference was made possible thanks to the invaluable support of the Bank of Greece, the Hellenic Bank Association, the National Bank of Greece, the Alpha Bank, the Hellenic Loan Services Association and the M.Sc. in International Negotiations of the AUEB.
Here, we highlight the positions of the speakers of the Training Day of the 6th ECB Simulation Conference. We are greatly honoured to have speakers such as Ms. Papaconstantinou Christina, Deputy Governor of Bank of Greece, Mr. Vujčić Boris, Governor of the Croatian National Bank, Mr. Glöckler Gabriel, Principal Adviser, Directorate General Communications of the European Central Bank, Mr. Gortsos Christos, Professor of Public Law, NKUA & President of the Academic Council of the European Banking Institute, Mr. Hadjiemmanuil Christos, Professor at the University of Piraeus and LSE and Member of the Monetary Policy Council of the Bank of Greece, Mr. Drakos Konstantinos, Vice-Rector at the Athens University of Economics and Business, Mr. Athanasopoulos Theodoros, Chairman of the Board of Directors, HLSA & CEO, Cepal Group, Mr. Zavvos Georgios, Chair of Board of Directors at the Hellenic Development Bank, Mr. Magginas Nikos, Chief Economist, Head of Economic Analysis Division, National Bank of Greece, Mr. Lekkos Ilias, Chief Economist, Piraeus Bank and Ms. Kourkouli Sylvia, Corporate Governance and Sustainability – ESG, Alpha Bank.
Opening Remarks
Mr. Georgios Zavvos, launched the Training Day by mentioning that developments such as wars and crises, are a strong test of the ability of the European Union (EU) to effectively transform its European Integration model around energy, trade, defense and financing of the economy. In addition, Mr. Zavvos also demonstrated the need for the acceleration of the establishment of the Banking Union and the European Capital Markets Union. Regarding the Greek financial system, Mr. Zavvos indicated that it should meet three main future objectives, including the maintenance of its resilience, the support of the green transition and the support of the Greek Small Medium Enterprises (SMEs). Moreover, speaking about the vital role of the Development Banks, especially during crises, he discussed the support of the HDB to the Greek SMEs and mentioned that the HDB aims to broaden the criteria for the financing of the SMEs, in terms of co-financing and guarantees provision. Finally, Mr. Zavvos highlighted the importance of the green transition by comparing it to the Industrial Revolution.
The Opening Remarks closed Mr. Theodoros Athanasopoulos, who described the role of the loan servicers in the financial system. Mr. Athanasopoulos mentioned that loan servicers are asset managers which operate on behalf of banks and investors, and their main task is to assist SMEs, households and the economy with their restructuring strategies and to bring assets for the cases that restructuring fails through liquidations back to the economy. Finally, he discussed the prospects and challenges of the industry, as well as the need for all the involved parties to be literate and well-trained.
Keynote Speeches
Keynote Ομιλίες begun with Ms. Christina Papaconstantinou, in her presentation discussed the drivers of inflation in the euro area, the Eurosystem’s monetary policy response and some policy considerations going forward. Mrs. Papaconstantinou pointed out the soaring energy prices, the significant supply bottlenecks (both factors exacerbated by the war in Ukraine) and the recovery in demand following the lift of the restrictions that were imposed to curb the pandemic as the main factors of the increase of inflation. Mrs. Papaconstantinou continued by noting that the appropriate response for monetary policy in order to safeguard price stability is to proceed in a gradual but determined manner, incorporating optionality and flexibility. Finally, Mrs. Papaconstantinou emphasized that when deciding on the path of monetary policy normalization, the factors that need to be considered are the increasing risk of a recession, the transmission lags of the decisions that aim to tackle inflation, the fact that the inflation in the euro area is mainly supply-driven and the potential spillover effects relating to the synchronized tightening of monetary policies across the world. Monetary policy needs to remain an anchor of stability and confidence that inflation will return to its target in a timely manner.
The Keynote Speeches were concluded by Mr. Gabriel Glöckler, who highlighted the important role of the ECB’s communication policy and how it affects all stakeholders in the economy. He continued his speech by presenting the progress that the ECB has made and continues to make in the field of communication in order to strengthen its credibility in an environment of polarization, controversy and low trust, and underlined the important role of the National Central Banks in communicating policy to national audiences. He also stressed the importance of dialogue with young people through activities such as the ECB Simulation Conference and mentioned the need to broaden this dialogue. In addition, Mr. Glöckler raised the issue of the current lack of understanding of the ECB’s purpose and role by the general public, which creates a gap in the trust they have in the institution. Finally, he described ways in which the ECB is trying to simplify and modernize policy communication in order to meet the challenge.
Continuing Mr. Boris Vujčić addressed the motivation for the adoption of the euro and discussed the current situation of the Economic and Monetary Union (EMU). Referring to the economic benefits of adopting the euro, Mr. Vujčić emphasized on the lower exposure to foreign exchange risk, on the higher capacity to respond to financial crises and external shocks and on the lower transaction and borrowing costs, while adding other benefits such as the reputational gain of Croatia and the participation in the decision making processes of the euro area. Mr. Vujčić pointed out that the economic costs of adopting the euro are relative small, noting mainly the loss of monetary autonomy, one-off changeover costs and a negligible increase in consumer prices. Finally, Mr. Vujčić presented the current situation of the EMU and in particular the tightening of the conditions for the adoption of the euro, which forces the candidate member states to make considerable efforts to join and marks significant changes in the institutional organization of the EMU.
Inflation and the threats affecting the stability of the financial system
Mr. Gortsos, in his presentation referred to the way in which the current developments in the macroeconomic landscape affect the stability of the financial system.
In particular, he mentioned that the permacrisis environment in Europe has led the economy into a situation of high inflation and low growth. In addition, he stressed that the factors contributing to inflationary pressures are beyond the direct ECB’s control, and in order to address the current situation, in addition to raising key interest rates, aligning fiscal and monetary policy in the European economy is necessary. Finally, he focused on the elevated risks that may affect financial stability, as bank profitability is expected to decline in 2023, which will lead to a further reduction in lending to the real economy, significantly increasing the probability of a new wave of non-performing loans.
Central Bank Digital Currencies and Digital Euro
The second discussion panel was lanched by Mr. Konstantinos Drakos, who referred to stablecoins and Central Bank Digital Currencies (CBDCs). First of all, he stressed the need to use the term “crypto assets”, instead of “cryptocurrencies”, as these assets do not perform the basic functions of money and are not legal tenders. He also underlined that cryptocurrencies are characterized by high volatility, which prevents the development of a transaction framework based on them. In addition, Mr. Drakos focused on stablecoins, which were created to cure the problem of the volatility of crypto assets. In more detail, he analysed the forms of stablecoins, the technologies on which their design is based, the positive aspects, and the risks created by their use. Finally, Mr. Drakos analyzed the topic of Central Bank Digital Currencies and in particular the prospect of creating a Digital Euro, examining its possible forms, its advantages over traditional banknotes, as well as reflections on the negative effects of its issuance.
The panel presentations concluded by Mr. Christos Hadjiemmanuil, who in his presentation referred to the prospect of creating a digital euro, which will significantly reduce the cost of cross-border and direct payments. More specifically, Mr. Hadjiemmanuil analyzed the characteristics that the digital euro should have and particularly emphasized the importance of security and privacy policies for users and the need to create criteria for its use with an emphasis on the fact that it should not be used as an investment instrument. Finally, he raised the issue of restricting the use of banknotes with the appearance of the digital euro, but also of establishing the appropriate legal framework for its issuance and use.
The impact of inflationary pressures on the European Economy and the financial system: Transformation and growth in the new environment
The last discussion panel of the Training Day, began by Mr. Ilias Lekkos, who discussed the challenges that the European economy is currently facing. As Mr. Lekkos mentioned, post-covid supply bottlenecks, the high demand for goods, and high levels of freight led to high inflation during 2022 which now gradually lessens. Mr. Lekkos also highlighted that in 2023 a recession of 0.5% and inflation of 5% is expected in the EU. Moreover, Mr. Lekkos stated that a huge part of this inflation is due to imported energy and may have harmful effects on the economy, such as an increase in unemployment rates, while the European economy will start to slow down. Closing his speech, Mr. Lekkos mentioned that according to forecasts, inflation is expected to start decreasing gradually and finally drop at a rate of 2,5% by 2024.
The Training Day speeches were concluded by Ms. Sylvia Kourkouli, who gave a speech regarding ESG integration challenges in banking. As she noted the last few years are marked by important changes in the European and international levels. Those changes touch on a wide agenda such as Sustainability and Climate Change background, ESG Initiatives and Standards, Regulatory & Supervisory Reporting Requirements, and the drafting and implementation of a clear transition strategy. Mrs. Kourkouli also mentioned that while “Sustainability” and “Climate Change” are not new for the banks or the economy a series of international agreements (Paris Agreement, EU Green deal, etc) speeded up the need for transformation. In addition, she underlined that current ESG standards are also focused on banks because they are the main source of financing for the economy and regulators, governments, investors, and stakeholders increase the pressure on the financial system as most stakeholders consider pressure the principal tool to drive change. Moreover, Mrs. Kourkouli mentioned that supervisory expectations on climate-related and environmental risks as they are expressed by the ECB and EBA, together with non-financial reporting requirements create the need for increased ESG-related data. She stressed that Banks face the challenge of sourcing out those data as Large listed corporates, due to shareholder expectations, are the only companies that publish them in an organized manner, while SMEs and companies with more than 500 employees newly subject to CSRD are not currently providing data of the same quality. Closing her speech, Mrs. Kourkouli underlined that ESG data will eventually need to be integrated with multiple parts of the lending and investment chain.
Continuing, Mr. Nikos Magginas presented the macroeconomic developments of the European economy. More specifically, Mr. Magginas mentioned that inflation reached its highest point in the last 40 years, underlining that despite the rise, economic activity remained relatively unchanged. He continued his speech by describing developments in the labor and equity markets, where he said that the unemployment rate recorded historic lows in most developed countries and equity markets managed to hold most of the gains of the previous decade despite the correction that took place in 2022. At the same time, he focused on the fiscal expansion that took place in order to counter the effects of Covid-19 which led to an increase in public debt around the world and stressed that the extended period of “unconventional” monetary policy measures is coming to an end. Finally, Mr. Magginas underlined that the strong recovery that followed the Covid-19 crisis combined with geopolitical developments and the energy crisis led to a rapid increase in inflation, which is expected to slow down in 2023.
Overall, the critical success factors for the ESG integration and transition are to:
- Define overall ambition, set targets, and communicate Internally and Externally
- Establish a clear Sustainability Framework to align processes and manage risks
Develop underpinning capabilities
- Get Involved
- ECB Simulation Conference
