ECB Vice-President discusses central bank independence and global cooperation

Luis de Guindos, Vice-President of the European Central Bank (ECB), emphasized that independence in central banking leads to better outcomes in inflation control and interest rates. An independent central bank is more credible and typically has a yield curve below that of non-independent banks.

He praised Federal Reserve Chair Jerome Powell and highlighted the importance of applying the principle of independence to the Fed. De Guindos noted that trust in the Fed’s independence is crucial for global markets and that cooperation with the Federal Reserve has been normal and positive for financial stability.

Regarding Europe’s financial security, he stated that it is primarily in the hands of Europeans and the ECB, and that Europe aims to become more independent in areas such as defense, cloud services, artificial intelligence, and global payment systems. The ECB intends to continue cooperating with the Fed as in the past.

De Guindos discussed efforts to expand cooperation with other central banks by developing liquidity lines, emphasizing that these are not due to mistrust but to enhance the euro’s international role. He also clarified that there have been no discussions about pooling dollar reserves among countries.

On banking regulation, he explained that the ECB believes European banks hold appropriate capital levels, which are not restrictive and are a competitive advantage. He defended the current capital requirements and supervisory standards, citing the positive market valuation of European banks and improved return on equity.

He addressed proposals on banking regulation, including treatment of Additional Tier 1 (AT1) capital, and emphasized that the ECB’s recommendations aim to reduce unnecessary burdens without compromising financial stability. De Guindos also mentioned ongoing efforts to simplify supervision and reporting processes to reduce costs for banks.

Regarding the ECB’s leadership succession, he highlighted the importance of experience, institutional knowledge, and a broad view of economic policy. He acknowledged the lack of women candidates and expressed support for increasing gender diversity on the ECB Executive Board. He noted that Isabel Schnabel’s potential reappointment depends on legal considerations and that the next leadership change is expected in two years.

De Guindos concluded with a light remark about his record as the highest-ranking Spaniard at the ECB, expressing a preference for supporting Atlético Madrid.