Building a More Resilient Financial System

Resilience Building a More Resilient Financial System

An Interview with Christine Lagarde, President, European Central Bank

EDITORS’ NOTE Christine labor law from the University Paris X Law What are your key priorities leading Lagarde has served as President of School, a master with major in economics the ECB? the European Central Bank since and fi nance from Sciences Po Aix-en- Our price stability objective is the lodestar November 2019. She also serves as Provence, and a master in American liter- that guides our policy priorities. First and fore- Chair of the European Systemic Risk ature from Avignon Art College. most, our priority is to manage the enormous Board, a member of the Board of crisis affecting us all. The COVID-19 pandemic Directors at the Bank for International ORGANIZATION BRIEF The European has infl icted an unprecedented shock on the Settlements, and a member of the G7 Central Bank (ecb.europa.eu) is the cen- European economy. Our resolute and forceful and the G20. Additionally, Lagarde tral bank of the 19 European Union action is essential in supporting the economy served as Managing Director of the countries which have adopted the euro. on its road to recovery and redirecting infl ation International Monetary Fund, Minister Its main task is to maintain price stabil- towards our medium-term aim. of Economy and Finance of France, ity in the euro area and so preserve the A second key priority is to adapt to the French President of the European Christine Lagarde purchasing power of the single currency. changing economic environment in which mon- Union, ECOFIN President, French etary policy operates. Declining trend growth, President of the G20, President of the G20 fi nance How do you define the mission of the rapid digitalization and changing financial ministers and central bank governors, Minister of European Central Bank and what do you structures are infl uencing price developments. Agriculture and Fisheries of France, Minister of see as its role in the world? Climate change may signifi cantly affect price Trade of France, Global Chairman of international Our primary mandate is to keep prices sta- stability in the future. To preserve the effective- law fi rm Baker McKenzie, Member of the Global ble in the euro area. By aiming to keep infl ation ness of our monetary policy, we not only need Executive Committee and Managing Partner, Baker below, but close to, 2 percent, we ensure that the to keep a close eye on these issues, but also McKenzie Paris offi ce, Attorney at law practicing euro is safe and stable and so provide the bedrock take action. To that end, we are conducting a predominantly in commercial, mergers and acqui- for economic growth and job creation. Besides strategy review which will cover all aspects of sitions, antitrust, labor law and arbitration for inter- underpinning Europe’s economic strength, the our monetary policy. national corporate clients, and a lecturer in contract euro also plays an important international role. Third, a priority close to my heart is to law at University Paris X Law School. Lagarde has As the world’s second biggest currency, the euro bring the ECB closer to the people. We need received numerous international awards includ- makes the international fi nancial system more to engage in a genuine dialogue to sustain and ing the Atlantic Council’s 2011 Global Citizenship resilient and promotes world trade. Our drive to nurture trust in our institution. People gain a Award and the European Institute’s Transatlantic uphold a strong and reliable currency is part of deeper trust in the ECB when they understand Leadership Award. Lagarde earned a master Europe’s broader commitment to an open, multi- our decisions and appreciate their importance in commercial law and DESS in commercial and lateral and rules-based world economy. for their day-to-day lives.

“Resilience is a quality shared by people and economies; it is the ability to adapt to unexpected circumstances, quickly recover from adverse shocks and bounce back into shape.”

“The ECB creates a more resilient world through its contribution to a strong European economy and ﬁ nancial system for the good of Europeans and their trading partners.”

How do you defi ne resilience? Who are some of the most resilient opportunities are more widely shared. Second, Resilience is a quality shared by people leaders you see? people’s main concerns today are issues such as and economies; it is the ability to adapt to unex- You can see whether leaders are resilient or climate change, immigration and the economic pected circumstances, quickly recover from not in times of crisis. I have noticed time and again situation, which clearly cut across borders. The adverse shocks and bounce back into shape. that when there is a crisis, women are called to EU and other multilateral institutions have a huge What contributions do you feel the ECB the rescue. Women tend to be more resilient lead- opportunity to reconnect with people and make can make to build a more resilient world? ers because of their ability to listen, their desire to concrete progress in tackling these issues. As the world’s largest trading bloc and the top build consensus and their good awareness of risks. How critical is collaboration and trading partner of 80 countries across the world, This has certainly been the case during this pan- strong global alliances to building a more Europe is deeply integrated into global markets. demic where female leaders in countries like New resilient world? The ECB creates a more resilient world through its Zealand, Germany and Taiwan have done a very The coronavirus pandemic is a stark contribution to a strong European economy and good job. So I think we should promote women’s reminder of the benefi ts of multilateralism. Now fi nancial system for the good of Europeans and leadership if we want a more resilient world. more than ever, it is vital that we cooperate their trading partners. It does this in two ways. There has been, internationally, and closely and learn from each other. Only then will First, by maintaining price stability, which implies even within the EU, a trend away from we be able to respond appropriately and chart achieving the maximum economic growth that we cross-border collaboration, a rise in nation- a course out of this crisis that enables a rapid associate with it, the ECB helps stabilize the econ- alism, and a tendency for nations to increas- return to sustainable global growth. omy. Second, as the supervisor of the European ingly go it alone. What does this mean for But even once the pandemic is behind us, banking sector, which includes eight global sys- the future, particularly in the face of far- advanced economies will continue to face chal- temically important banks, the ECB works towards reaching crises caused by climate change? lenges such as changing global trade, slowing building a more resilient fi nancial system. Multilateralism has been a powerful engine potential growth rates and climate change. But a robust economic system is not enough of growth. It has brought countries and economies These common challenges will require common on its own. A more resilient world must be based closer together. But far too many people still suf- responses. Promoting a stable and transparent on more sustainable growth. One important chal- fer from poverty and a lack of opportunities, trade system remains essential to the stability of the lenge for sustainability is climate change. We are which has caused anger, resentment and a retreat global economy. Sustainable growth will require ready to play our part, within our mandate, to from multilateralism. However, despite the global strong domestic policies, bolstered by international address the risks associated with climate change. rise in unilateral, go-it-alone approaches, I do not action. Additionally, only a collective effort to com- In this context, we should aim to achieve price believe that this trend is inevitable, for two rea- bat climate change can consolidate regional efforts stability and economic growth in the most carbon- sons. First, we can create a new multilateralism that to curb greenhouse gas emissions and effectively effi cient environment possible. enjoys broad support by ensuring that economic mitigate climate risks.•

“You can see whether leaders are resilient or not in times of crisis. I have noticed time and again that when there is a crisis, women are called to the rescue.”