FRANKFURT (MNI) – The following is the second part of a verbatim
text of the introductory statement by European Central Bank President
Jean-Claude Trichet at the hearing before the Committee on Economic and
Monetary Affairs of the European Parliament:

I would like to take the opportunity of todays meeting to address
another topical issue: the finalisation of the proposed EU Regulation
for OTC derivatives, central counterparties and trade repositories. We
would welcome if the draft report of your Committee on this significant
legislative initiative took account of the important role that central
banks play for ensuring the stability and efficiency of market
infrastructures. Central banks have proven their relevant role during
the financial crisis and we would thus welcome that their contribution
to financial stability be fully reflected in the new Regulation.

This means that the central banks would be adequately involved in
the new EU framework for central counterparties (CCPs) and trade
repositories. They would cooperate with supervisors in the authorisation
and the ongoing risk assessment of infrastructures, technical
standard-setting and decisions regarding the recognitions of third
country central counterparties and repositories. Regarding the
arrangements for cooperation and information-sharing among authorities,
the Commissions proposal of colleges provides, in our view, a set-up
that is preferable to bilateral contacts between those authorities and
ESMA.

III. Eurobonds

Let me now say a few words on the other subject you suggested:
so-called Eurobonds. The ECB is not in favour of introducing such
Eurobonds, understood as guaranteed government bonds on a joint and
several basis, in the present circumstances. We note that the aim is to
support the development of euro area bond markets, as well as at
providing a possible mechanism to alleviate or resolve the ongoing
sovereign debt crisis.

With respect to supporting the euro area bond market, the main
advantage could be cost savings from reducing the liquidity premium in
the bond markets. This could arise particularly if Eurobonds gained
benchmark status, comparable for instance to US Treasury bonds. As
regards the impact on sovereign debt developments, moving to Eurobonds
would remove the financial market pressure in the short term but, if not
replaced by new mechanisms, fundamentally reduce incentives for sound
fiscal policies.

In our institutional set-up, fiscal discipline is induced via
existing domestic provisions; the fundamental institutional framework of
governance (the Treaty and the Stability and Growth Pact) and the
assessment by savers and investors.

Jointly guaranteed bonds would not permit savers and investors to
assess fiscal policies of individual countries. As long as we do not
have a political federation with a federal budget, this would create an
incentive problem. It would impair the incentives for fiscal prudence at
the domestic level.

Consequently, Eurobonds would be the natural counterpart if
national fiscal competences were clearly at the level of a union which
would be a federation. In the present institutional framework we need to
make very important progress in the collegial governance and
surveillance of fiscal policies which remain national.

Dear Honourable Members, I thank you for your attention and am at
your disposal for questions.

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$]