Annual Report 2024

2024 saw the ECB advance further through its monetary policy cycle. This cycle has consisted of three distinct phases. The first was a tightening phase, which ran from July 2022 to September 2023, during which interest rates rose by a record 450 basis points. The second was a holding phase in which rates remained steady. And in the third – a dialling-back phase which began in June 2024 – monetary policy has gradually become less restrictive.

The period under review in this report falls into the last two phases of this policy cycle. At the start of 2024 the ECB was still in the holding phase, with its deposit facility rate at 4%. At that time, inflation had fallen around three-quarters of the way from its peak, and stood at 2.9%. The staff projections were showing inflation returning to our medium-term target of 2% in 2025. But there was uncertainty about the persistence of inflation.

Measures of domestic inflation were high and sticky. Past increases in inflation were still passing through to wages in a staggered way. And the staff projections hinged on firms absorbing these wage increases through profits, rather than raising prices, and on a recovery in labour productivity that would lower unit labour costs. Both of these factors could only be confirmed over time.

To deliver robust policy in this context, the ECB had – since March 2023 – been basing its rate decisions on three key criteria: the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. While the inflation outlook was improving and monetary policy was clearly dampening demand, the underlying inflation criterion called for caution.

Over the course of 2024, however, our restrictive policy stance ensured that inflation continued to fall towards our target. By June, not only had the inflation outlook remained stable, indicating consistently that inflation would reach 2% in 2025, but also most measures of underlying inflation had eased. This “cross-check” bolstered the ECB’s confidence that inflation was returning to its target in a sustained manner.

Consequently, after nine months of holding rates steady, we began dialling back the level of monetary policy restriction. In June we cut rates by 25 basis points, while remaining data-dependent and not pre-committing to a future path for rates. As the incoming data confirmed the favourable inflation outlook, we gradually reduced the degree of monetary policy restriction further.

Over the course of September, October and December, we reduced our main policy rate by a further 75 basis points. We ended the year increasingly confident that the disinflation process was well on track.

Our balance sheet also continued to normalise during 2024, declining by half a trillion euro. At the end of December, two milestones were reached: the full repayment of funds borrowed by banks under the third series of targeted longer-term refinancing operations, and the end of reinvestments of the principal payments from maturing securities purchased under the pandemic emergency purchase programme.

In an environment of gradually declining liquidity owing to the normalisation of the balance sheet, the ECB introduced changes to its operational framework for implementing monetary policy. In particular, the ECB announced it would continue to steer the monetary policy stance by adjusting the deposit facility rate, while also narrowing the differential between it and the rate on the main refinancing operations. Going forward, the ECB will provide liquidity to the financial system through a broad mix of instruments. And on the basis of the experience gained, the Governing Council will review the key parameters of the operational framework in 2026.

It was an eventful year for payments as well. Driven by the rising number of participants in the TARGET Instant Payment Settlement (TIPS) system – a service developed by the Eurosystem to enable instant payments across Europe – the daily average number of instant payments in euro surged by 72% over the year.

In 2024 the Eurosystem moved onward with its two-year preparation phase for a digital euro. The first digital euro progress report was published in June, and the second in December. The ECB also continued its work on developing a digital euro scheme rulebook, which will standardise the digital euro’s use and management in the euro area. Preparations for the development of a new series of euro banknotes also gathered pace. The Governing Council has now selected motifs for the themes “European culture” and “Rivers and birds” and established a jury for a design contest to be launched later in 2025.

As the world becomes more digital, the ECB is taking decisive steps to integrate artificial intelligence technologies into its work. ECB staff can now use four large language models to support their work, benefiting over 4,500 users, and there are several experimental projects ongoing in areas including automated communication and data visualisation.

In 2024 the ECB also expanded its work on climate change with the launch of its climate and nature plan 2024-2025. This initiative focuses on three key areas: the impact and risks of the transition to a green economy; the increasing physical impact of climate change and the economic effects of climate change adaptation; and the risks of nature loss and degradation and their interaction with climate-related risks.

In 2024 the House of the Euro – located in Brussels and bringing together the ECB and seven national central banks – celebrated its first year. Established to foster cooperation among Eurosystem central banks and enhance their visibility in a city where many European institutions are based, the House of the Euro has become a dynamic hub for collaboration, dialogue and debate between central bankers and key stakeholders.

In an increasingly uncertain world, more Europeans are recognising the importance of unity. And in 2024 support for the euro among citizens reached a record high, reflecting a broader appreciation for the single currency as a project that fosters European peace and prosperity. This growing support also underscores the dedication of the ECB’s staff and others working to serve the interests of the people of Europe.

Frankfurt am Main, April 2025

Christine Lagarde

President

Global economic activity remained resilient in 2024, continuing to expand at a moderate pace. Uncertainty increased during the year to elevated levels, amid heightened geopolitical tensions and questions surrounding economic policies, particularly following the US presidential elections. Global trade recovered from its slowdown in 2023 as imports were frontloaded in the face of geopolitical and trade policy uncertainty. Global inflation moderated further, although persistent services inflation across advanced economies slowed the disinflation process. The euro depreciated against the US dollar and to a lesser extent also in nominal effective terms. The euro area economy strengthened in 2024, largely on the back of positive global growth momentum and a resilient services sector, in the context of falling overall inflation. At the same time, industry remained weak, affected by restrictive financing conditions, high energy and other input costs, structural shortcomings and elevated uncertainty. While the ECB’s monetary policy tightening of the previous years continued to be transmitted forcefully to economic activity, underpinning the sustained decline in inflation over 2024, the labour market remained fairly resilient. Euro area governments continued to wind down support measures adopted in response to the COVID-19 pandemic, energy price and inflation shocks, reversing part of the previous fiscal loosening. Headline inflation in the euro area fell further in 2024, but more slowly than in the previous year as the impetus from unwinding energy inflation had dissipated. Underlying inflationary pressures moderated as a result of the fading impact of past supply shocks and the weaker demand associated with tight monetary and financing conditions and fiscal policies, but also remained under the influence of strong wage growth.

1.1 Global economic activity was resilient while headline inflation declined further

The global economy remained resilient in 2024 but risks to growth remained tilted to the downside amid widening divergences across sectors and countries. Economic activity expanded at a steady yet moderate pace of 3.4%, almost unchanged from the previous year but below its historical average (Chart 1.1, panel a). Activity was uneven across country groups, with emerging markets economies expanding by 4.1% while advanced economies grew at the slower pace of 1.9% (Chart 1.1, panel a). The disparities in growth rates were consistent with historical patterns, the long-run average growth in emerging markets over the period 1999-2023 exceeding that of advanced economies by 3.1 percentage points. Developments in global economic activity were also uneven across sectors, with global growth supported in particular by a robust services sector, contrasting with weaker activity in manufacturing. Global uncertainty remained elevated and near-term headwinds to growth increased during the year, reflecting heightened geopolitical tensions and economic policy uncertainty, especially on the trade and fiscal fronts following in particular the US presidential elections.

In the United States, economic activity remained robust throughout 2024, mostly reflecting solid domestic demand, in particular household spending. The tight US labour market eased over 2024, with the unemployment rate rising to 4.1% at the end of the year from 3.7% at the start. In China, economic growth slowed in 2024, albeit marginally. Muted domestic demand amid subdued consumer confidence and the protracted weakness in the real estate sector continued to weigh on growth, but improving net exports and fiscal and monetary stimulus supported growth momentum towards year-end.

Global trade recovered significantly in 2024, with import growth increasing to 4.4% from 1.2% in the previous year, although remaining slightly below its long-term average (Chart 1.1, panel b). Global trade growth was supported by strong demand for imported goods being brought forward amid concerns about disruptions to shipping routes in the Red Sea and possible delays ahead of the end-of-year holiday season. In the United States imports were also frontloaded given uncertainties associated with port strikes on the East Coast and with trade policies. A normalisation of goods imports, compounded by a still weak manufacturing cycle and a less favourable composition of global demand, were expected to have led to slowing trade momentum towards year-end.

Global annual headline consumer price index (CPI) inflation continued to ease in 2024 (Chart 1.2). It stood at 3.0% in October 2024, compared with 3.4% at end-2023. The decline in headline inflation was led by food and energy inflation, as well as core goods inflation (i.e. excluding food and energy). Services price pressures remained persistent across advanced economies.

The major risks to the outlook for global economic growth at the end of 2024 included increased global economic fragmentation and trade protectionism, notably in the United States, an escalation of geopolitical tensions in the Middle East or in Russia’s war against Ukraine, more frequent and severe weather events, and a further slowdown in China.

In terms of year-end values, energy prices rose overall in 2024 compared with 2023, as an increase in European gas prices offset a decline in oil prices. Brent oil prices dropped by 5%, primarily driven by demand-side factors, including subdued manufacturing output in Europe and a slowdown in Chinese economic activity. On the supply side, conflict in the Middle East and prolonged production cuts by OPEC+ countries kept oil prices from falling further but proved insufficient to drive them higher. European gas prices increased by 52% in terms of year-end values, although remaining well below their 2022 peak. Gas prices initially fell as a result of persistently low European consumption, particularly in the industrial sector. From the second quarter onward, however, prices rose steadily on supply-side pressures, including unplanned outages in Norwegian gas supplies, episodes of escalation in Russia’s war against Ukraine, and concerns surrounding the expiry of the gas transit agreement between Russia and Ukraine. By year-end, European gas storage levels had fallen below those of 2022 and 2023 and were also below their pre-energy crisis year-end average, highlighting Europe’s challenges in maintaining a sufficient precautionary buffer over the long term.

Following intra-year fluctuations, the euro ended 2024 somewhat lower in nominal effective terms (-1.1%) than at the end of 2023, as a result of partly offsetting bilateral exchange rate developments. On the one hand, the euro depreciated against the US dollar (-6.0%), a movement which was supported by positive US economic data surprises, flight-to-safety flows amid global geopolitical tensions and, later in the year, expected policy shifts under the new US Administration. Then as also euro area economic data weakened in the fourth quarter of 2024, interest rate markets anticipated a steeper path of future policy rate cuts in the euro area and a shallower path in the United States, which further weighed on the euro against the US dollar. Similarly, expectations of persistently restrictive monetary policy in the United Kingdom strengthened the pound sterling, both broadly and relative to the euro. The euro also weakened against the Chinese renminbi in 2024, albeit to a lesser extent (‑3.4%) as the renminbi’s strength was lessened by mounting economic headwinds in China. On the other hand, the euro strengthened against the currencies of most of its other major trading partners. Among them, the Japanese yen was under downward pressure through most of 2024, as persistently low interest rates in Japan reportedly fuelled “carry trade” flows from the yen into higher-yielding currencies.

1.2 Economic activity began to recover gradually in the euro area

Euro area real GDP grew by 0.9% in 2024, compared with 0.4% in 2023 (Chart 1.3). Quarterly growth rates turned positive at the start of 2024, after five consecutive quarters of stagnation, before slowing down again at the end of the year. The strengthening in growth was attributable mainly to the services sector, which continued to benefit from post-pandemic structural changes including a faster shift towards a more knowledge-based economy, the green transition and changing consumer spending patterns. Recovering real incomes, global trade and the Next Generation EU (NGEU) programme also supported economic growth. At the same time, the industrial sector remained weak owing to a combination of both structural and cyclical factors. The industrial sector was more affected than services by the still restrictive conditions from the past monetary policy tightening cycle and high input costs. While most models show that the peak impact of the tightening on economic activity was reached in the period at the end of 2023 and the beginning of 2024, the monetary policy loosening cycle which started in mid-2024 had not yet fed through the economy. The industrial sector was also affected by the euro area losing export market share, as well as by regulatory challenges and by elevated uncertainty relating to both political and geopolitical events. Overall, growth in 2024 reflected positive contributions from private and public consumption as well as net trade, while investment and changes in inventories dampened economic activity.

Private consumption accelerated in 2024, increasing by 1% compared with the previous year. Despite robust services consumption, total private consumption increased only modestly in the first half of the year, as demand for goods remained weak (Chart 1.4). It accelerated strongly in the third quarter of the year, boosted by temporary factors such as the Paris 2024 Olympic and Paralympic Games, and moderated in the fourth. The growth of real disposable income supported household spending in 2024, as nominal wage growth increased, inflation slowed and employment growth remained resilient. Nevertheless, still tight financing conditions continued to weigh on household spending, with savings remaining elevated overall.

Housing investment fell strongly in 2024, amid still restrictive financing conditions and weak demand. It contracted by 4.0% compared with 2023, recording the largest annual decline since 2009, during the global financial crisis. This contraction was mainly due to the lagged impact of the monetary policy tightening, resulting from higher mortgage rates and tighter bank lending standards. Although real incomes were recovering and house price growth remained modest, tight financing conditions limited housing affordability and depressed demand for residential real estate property. However, given the strong post-pandemic recovery in housing investment, in part supported by (now expired) generous fiscal incentives in Italy, housing investment remained 1.3% above its pre-pandemic level at the end of 2024, although it fared worse than private consumption (3.1%) and non-construction investment (5.2% excluding Irish intangibles).

Non-construction investment (the closest national accounts proxy for business investment) contracted again in 2024, against a background of weak domestic and foreign demand, tight financing conditions and high uncertainty on various fronts. Overall, non-construction investment contracted by 2.3% compared with 2023, albeit with considerable quarterly volatility throughout the year (see Chart 1.4). Excluding volatile multinational-driven intangibles in Ireland, it declined by 0.5% in 2024.^[1] The outcome reflects both a continuation of weakness in investment in machinery and equipment and a deceleration in the rates of intangible investment growth over recent years. Amid muted domestic demand and a weaker export sector, longer-term production expectations – typically a key driver of investment – remained subdued throughout the year, reducing firms’ incentives to invest. Concerns over competitiveness losses, moderating profitability, and high and wide-ranging uncertainty – stemming from geopolitical developments, increasing fears of growing trade fragmentation and heightened policy uncertainty – also weighed further on business investment in 2024.

Euro area exports improved slightly in 2024, but remained on a relatively weak trajectory. Several elements contributed to subdued export growth, despite a backdrop of improving foreign demand. Lagged effects from the past appreciation of the euro had a negative impact. Energy costs remained a significant concern, with relatively high gas prices increasing production expenses for euro area exporters, thereby squeezing profit margins and reducing competitiveness. Weak demand from China, especially for capital goods, and increased competition from Chinese manufacturers also posed challenges for the euro area. Imports grew at a subdued rate, affected by weak domestic demand and investment. Overall, net trade had a slightly positive impact on growth. The euro area trade balance further improved in 2024 compared with 2023.

Labour market

The euro area labour market remained resilient overall in 2024, although employment growth slowed relative to recent years and survey indicators suggested that labour markets were cooling over the course of the year. The unemployment rate declined from 6.5% in January to 6.2% in December – one of the lowest points recorded since the introduction of the euro and 1.3 percentage points below the pre-pandemic level observed in January 2020. The unemployment rate was also 6.2% on average in the last quarter of the year (Chart 1.5). Total employment and total hours worked kept broadly in line with the growth of the economy, both rising in 2024 by 1%. These developments led to a largely flat productivity path. The weak growth of labour productivity was mostly cyclical, driven by weak demand, while companies hoarded labour, i.e. held on to more workers than necessary in a period of low economic growth. However, structural factors may also have played a role. Average hours worked declined by 0.1% in 2024 and, as of the last quarter of the year, remained 0.9% below the pre-pandemic level. The path of average hours worked continued to reflect factors such as the hoarding of labour from the second half of 2023 and still elevated levels of sick leave. The labour force participation rate in the age group 15-74 years increased to a level of 66% in the fourth quarter of 2024, which is 1.2 percentage points above its pre-pandemic level. Women, older workers, persons with higher education and foreign workers have contributed the most to this increase in the labour force. Labour demand weakened in 2024 compared with previous years, with the job vacancy rate receding further from its peak in the second quarter of 2022 to a level of 2.5% in the fourth quarter of last year, still above its pre-pandemic level of 2.3% in the last quarter of 2019.^[2] The catch-up of nominal wages with inflation favoured a realignment of employment and output dynamics, while bringing real wages more into line with the recovery in productivity. Therefore, by means of its medium-term orientation, and without prejudice to maintaining price stability, the monetary policy of the ECB contributed to supporting employment and productivity, which are among the European Union’s objectives to which the ECB can contribute.

1.3 Euro area fiscal stance tightened

The euro area general government deficit is expected to have narrowed further in 2024 to slightly above the 3% of GDP threshold (Chart 1.6), from 3.6% in 2023. This mainly reflects a tightening of the fiscal stance in 2024 due to the phasing-out of government measures adopted in the years 2022-23 to compensate households and firms for high energy prices and inflation.^[3] At the same time, higher interest spending on government debt, notably in high-debt countries, likely contributed negatively to the fiscal balance.^[4]

The euro area debt-to-GDP ratio is expected to have increased slightly to close to 88% in 2024, from its already elevated level of 87.4% in 2023, and thus remain well above its pre-crisis level of 83.6% in 2019 (Chart 1.6). This increase was likely driven by the primary deficit and positive deficit-debt adjustments.

At the end of 2024 the fiscal stance was projected to tighten further in 2025, although at a slower pace than in previous years. However, this fiscal outlook was seen as surrounded by high uncertainty. Political risks stemmed from the fiscal plans of large euro area countries as well as from the future decisions of the new US Administration and the European responses. These risks came on top of long-term fiscal pressures arising from population ageing. Moreover, fiscal policy is increasingly expected to provide strategic public goods to strengthen the resilience of Europe’s economy by making progress on the green and digital transitions and increasing economic security and defence. For the green and digital transitions, an important contribution will be made by the NGEU programme until its expiry at the end of 2026 (see Box 1).

The reformed EU economic governance framework entered into force on 30 April 2024. The framework is focused on debt sustainability and aims to ensure sound and sustainable public finances, while incentivising structural reforms and investment.^[5] A central element of the new framework is the release of countries’ medium-term fiscal-structural plans. These plans outline a path of net expenditure growth as well as the underlying macroeconomic assumptions and, for countries that aim to extend the adjustment period from four to seven years, the planned fiscal-structural measures that would allow them to put their debt ratios on a plausibly declining trajectory over the medium term.

With the release of its autumn package on 26 November and 18 December, the European Commission launched the first implementation cycle of the new economic governance framework. The package includes the assessments of the countries’ medium-term fiscal-structural plans and draft budgetary plans for 2025. The European Commission found that 15 of the 16 medium-term fiscal-structural plans submitted by euro area countries met the requirements under the new framework. The recommended fiscal adjustment period was extended from four to seven years for four euro area countries (Spain, France, Italy and Finland), on the request of the countries. The extension must be underpinned by a set of investment and reform commitments which are designed to, among other things, contribute to sustainable and inclusive growth and resilience, to support fiscal sustainability.^[6]

Following a recommendation by the European Commission, the ECOFIN Council decided in July 2024 to open an excessive deficit procedure for five euro area countries, namely Belgium, France, Italy, Malta and Slovakia. To correct the excessive deficits, the Commission recommended multi-annual net expenditure paths in line with the available medium-term fiscal-structural plans. The multi-annual net expenditure path has become the main surveillance indicator under the new economic governance framework.

Implementing the revised economic governance framework fully, transparently and without delay will help governments bring down budget deficits and debt ratios on a sustained basis.

1.4 Headline inflation fell further towards the target

Headline inflation in the euro area as measured by the Harmonised Index of Consumer Prices (HICP) remained on a disinflationary path in 2024. It stood at 2.4% in December, 0.5 percentage points lower than a year earlier (Chart 1.7). While the disinflation process in 2023 had been driven mainly by the unwinding of earlier supply shocks, in 2024 it increasingly reflected the transmission of restrictive monetary policy. The phasing-out of public support measures that had been adopted in response to the pandemic and energy price shocks supported disinflation by dampening aggregate demand. However, it also acted as a drag on the disinflationary process, as the measures had been designed to contain inflation. In this context, most of the fluctuations in HICP inflation over the course of the year were due to energy inflation, including the uptick at the end of the year. Developments in non-energy goods prices were the main contributor to further disinflation, with both the food and the non-energy industrial goods (NEIG) components of the HICP recording lower inflation rates in December 2024 than in December 2023, by 3.5 percentage points and 2.0 percentage points respectively. In the case of NEIG, rates reached a level close to the longer-term pre-pandemic average rate of 0.6% (measured over 1999 to 2019). The declines in these two components reflected the fading-out of pipeline pressures stemming from previous cost shocks and a generally more benign international pricing environment. Conversely, the HICP services component was relatively sticky, hovering around 4.0% throughout the year. This persistence reflected the relatively strong impact of wage pressures on many services items and the influence of “late mover” items (such as insurance, housing rentals, etc.), whose prices have reacted with a delay to past exceptional inflationary shocks.

Energy inflation was on average somewhat lower in 2024 than in 2023 and remained in negative territory for most of the year. The negative annual rates of energy inflation at the beginning of the year were mainly due to gas and electricity price developments, while in the period from August onwards they were driven by transport fuel prices. The volatility in wholesale energy markets related to events such as Russia’s war against Ukraine and base effects stemming from developments in the previous year added to the uneven profile of energy inflation in 2024. Food inflation strongly supported disinflation, particularly as a result of the sharp decline in the early months of the year, when the annual rates of both processed and in particular unprocessed food prices fell. This was related to the fading of pipeline pressures from the earlier energy and food commodity price surges.^[7] Subsequently, food inflation saw some volatility, to a large extent reflecting the fluctuation in unprocessed food prices, particularly for vegetables, which was likely related to adverse weather conditions.

Underlying inflation indicators are aimed at capturing the persistent or common component of inflation, indicating where headline inflation is expected to settle over the medium term once temporary factors have dissipated. However, as these indicators had themselves been pushed upwards by past large supply shocks, they were expected to moderate in the overall disinflation process.^[8] Core inflation – as measured by HICP inflation excluding the volatile components energy and food – declined from 3.4% in December 2023 to 2.7% in April 2024 and moved broadly sideways thereafter. It also stood at 2.7% in December 2024. The decline in core inflation in the early part of 2024 reflects the fall in NEIG inflation, while services inflation remained broadly unchanged throughout the year, hovering around a rate of 4.0%. Services inflation usually takes longer to fall than other inflation components, as many services items respond with a delay to general inflationary shocks (e.g. housing rentals, insurance, and health and education services). The persistence of services inflation in 2024 is also linked to high growth in wages, which constitute a larger share of costs in the services sector than in manufacturing. Other underlying inflation indicators also decreased during the year, albeit with some volatility, and more so during the first half of the year. Overall, these declines reflect the fading effects of the previous supply shocks as well as weaker demand amid still tight monetary policy. The latter also helps to explain clearer disinflation for goods than services, as the weight of items estimated to be sensitive to monetary policy is greater in the goods category than in the services category.^[9]

Domestic cost pressures, as measured by growth in the GDP deflator, decreased in 2024 to 2.9% from 5.9% in 2023. This reflected lower contributions from both unit labour costs and unit profits (Chart 1.8). The contribution from unit profits decreased as profits increasingly buffered still elevated upward pressures from unit labour costs.^[10] At the same time, these pressures receded as a result of a decline in wage growth, measured in terms of compensation per employee, and some strengthening in labour productivity growth. Annual growth in compensation per employee decreased to 4.5% in 2024 from 5.3% in 2023, but remained significantly above its pre-pandemic average rate (2.2%), reflecting continued tightness in labour markets and remaining pressure for inflation compensation. The moderation in compensation per employee growth reflected a swifter response of the wage drift than the growth of negotiated wages.^[11] This reflected, among other things, the likelihood that adjustments to compensate for inflation have shifted from being part of the wage drift to being incorporated in negotiated wages. At the end of 2024 euro area real wages had broadly returned to their levels before the inflation surge.

Longer-term inflation expectations as expressed in the ECB Survey of Professional Forecasters declined from 2.1% in late 2023 to 2.0% in the survey published in the first quarter of 2024 and remained at their well-anchored level in the subsequent rounds of the year (Chart 1.9). Additional survey data, such as from the ECB Survey of Monetary Analysts and Consensus Economics, also suggested that longer-term inflation expectations were in line with the ECB’s 2% target. The restrictive monetary policy supported disinflation not only by dampening demand but also through the sustained anchoring of longer-term inflation expectations, thereby limiting the risk of second-round effects. Longer-term market-based measures of inflation compensation (such as the five-year forward inflation-linked swap (ILS) rate five years ahead) saw somewhat more volatility over the year, but converged to levels close to 2% towards year-end. Volatility observed over the year most likely owed to changes in inflation risk premia, with estimated genuine inflation expectations relatively stable at around 2%. On the consumer side, median inflation expectations for three years ahead declined from the second quarter of the year till October, when they reached 2.1%, the lowest level since February 2022 when Russia invaded Ukraine. However, expectations subsequently rose above that rate for the remainder of the year owing to higher inflation and heightened uncertainty, though they remained lower than at the beginning of the year.^[12]

1.5 Financing conditions eased gradually, while remaining tight

With inflationary pressures gradually abating throughout 2024 (see Section 1.4), the ECB moderated the degree of monetary policy restriction by reducing its key interest rates as from June (see Section 2.1). In the first half of 2024 the – risk-free – ten-year overnight index swap (OIS) rate gradually increased by around 50 basis points and reached a peak for the year in the summer. Thereafter, owing to the drop in financial market interest rate expectations and lower term premia, the ten-year OIS rate declined gradually – to reach an average of 2.2 % in December 2024 (Chart 1.10), which is around 20 basis points less than the average in December 2023. Long-term government bond yields generally ended 2024 at higher levels than at the start of the year. In France sovereign yields were significantly higher than a year earlier, owing to the heightened uncertainty about the country’s fiscal outlook and political developments. Spreads between long-term sovereign yields and the corresponding risk-free rates generally widened in the last quarter of the year, a development associated with the easing of collateral scarcity amid higher (expected) sovereign debt issuance and the reduction of the Eurosystem balance sheet. In Italy a compression of spreads, which benefited from a more favourable rating outlook, contributed to a decline in long-term bond yields in 2024. The euro area GDP-weighted average of ten-year nominal government bond yields remained on average in December 2024 at the same level (2.7%) as a year earlier.

In 2024 stock prices increased in both the non-financial sector and, to a greater extent, the financial sector. In the latter, they were led by the banking sector, which benefited from high levels of profitability. The broad indices of euro area non-financial corporation and bank equity prices ended 2024 around 3% and 21% above their respective end-2023 levels. A decline in equity risk premia, better short-term earnings expectations, higher distributed dividends and lower long-term risk-free rates supported equity prices. Corporate bond yields declined in both the investment grade and high-yield segments and stood at lower levels at the end of December 2024 than a year earlier, owing to lower risk-free rates and a compression of spreads.

Bank deposits stopped contracting and started to recover towards the end of 2024 and broad money (M3) recovered as the degree of monetary policy restriction moderated. The annual rate of change of M3 was 3.4% in December, compared with zero in December 2023 (Chart 1.11). The recovery was driven by net foreign inflows, which reflected the sizeable current account surplus that stemmed from weak imports and foreign interest in euro area bonds amid attractive yields. Those inflows broadly offset the liquidity drain resulting from the reduction in the Eurosystem balance sheet. With funds borrowed under the third series of targeted longer-term refinancing operations being repaid (in full by the end of the year) and the Eurosystem asset portfolios contracting, banks continued to turn to more expensive market funding sources. Their funding costs nonetheless gradually declined from the peak levels of 2023, although by less than policy rates. Bank balance sheets remained robust overall.

Financing conditions in the euro area remained restrictive in 2024, although the cuts in the key ECB interest rates reduced the degree of monetary policy tightness somewhat. The nominal cost of borrowing for firms and for households declined to some extent, after reaching the highest levels in almost 15 years in 2023. The composite bank lending rate for loans to non-financial corporations stood at 4.4% in December, down by about 90 basis points compared with the end of 2023, and the equivalent rate for households for house purchase declined by about 60 basis points to 3.4% (Chart 1.10). The sizeable spread between the rates for firms and households that had emerged during the monetary policy tightening phase was thus only marginally reduced. The disparity in lending rates across countries remained contained, a sign that the ECB’s monetary policy was generally being transmitted smoothly across the euro area.

Bank lending to firms and to households remained weak on the back of still tight credit conditions and weak aggregate demand (Chart 1.11), while showing signs of a recovery in the second half of 2024. As indicated by the euro area bank lending survey, banks’ credit standards (i.e. internal guidelines or loan approval criteria) for firms tightened in the fourth quarter of 2024, after they had broadly stabilised over the previous quarters. The availability of bank loans improved only temporarily before deteriorating in the fourth quarter, according to the survey on the access to finance of enterprises. The annual growth rate of bank loans to firms was 1.7% in December. Overall, corporate debt financing remained weak and the net flows of external financing to firms were considerably below their longer-term dynamics, despite a pick-up in issuance and valuations of listed shares (Chart 1.12). Turning to lending to households, the gradual recovery in the annual growth rate of bank loans, to 1.1% in December, was mostly driven by mortgages. This was in line with the overall easing in credit standards during the year and a strong rebound in loan demand reported in the bank lending surveys in the second half of 2024, as well as with the sustained house purchase intentions reported in the Consumer Expectations Survey throughout the year. At the same time, by the end of the year the percentage of households reporting a deterioration in access to credit in that survey still outweighed the percentage of households reporting an improvement, with sustained recourse to consumer credit concentrated among lower income households. Moreover, banks continued to report a tightening in credit standards on consumer credit throughout 2024.

In 2024 the Governing Council moderated the degree of monetary policy restriction as inflation showed signs of converging sustainably to the 2% target while the euro area economy faced sluggish growth (see Section 2.1). Interest rates remained unchanged for almost all of the first half of the year. The Governing Council then lowered the deposit facility rate by 25 basis points in both June and September, marking a shift towards a less restrictive monetary policy. It remained committed to a data-dependent, meeting-by-meeting approach to determining the appropriate level and duration of restriction. In the third quarter economic activity showed continued subdued growth with some signs of stabilisation, supported by higher consumption and global demand. The Governing Council was increasingly confident in a gradual inflation decline and further lowered the deposit facility rate by 25 basis points in October and December.

The Eurosystem balance sheet contracted by €0.5 trillion in 2024, to €6.4 trillion by year-end, as part of the normalisation that had begun in 2022 (see Section 2.2). The reduction stemmed from early repayments and the maturing of operations in the third series of targeted longer-term refinancing operations (TLTRO III), and from the decline in the asset purchase programme (APP) portfolio and to some extent also in the pandemic emergency purchase programme (PEPP) portfolio, the latter portfolio moving to partial reinvestments as of July. The Governing Council approved changes to the operational framework for implementing monetary policy in March 2024 (see Box 2) and discontinued reinvestments under the PEPP at the end of 2024.

In 2024 the Eurosystem enhanced its risk management framework to ensure risk-efficient policy implementation. As a result of high policy rates, the ECB incurred losses from negative net interest income, which will be written off against future profits (see Section 2.3 and the ECB Annual Accounts for 2024). The net interest income of the Eurosystem is expected to increase again in the years to come, supporting its financial resilience.

2.1 Moderating the degree of monetary policy restriction

In January 2024 the Governing Council assessed that the economy remained weak, following stagnation throughout 2023. The near-term outlook for economic growth in the euro area was marked by a moderation of global economic activity and trade and tight financing conditions, with risks stemming from heightened geopolitical tensions due to the conflict in the Middle East and Russia’s war against Ukraine. However, some forward-looking survey indicators pointed to a pick-up in growth further ahead. In spite of sluggish growth the labour market remained robust, following a largely steady decline in the unemployment rate that had started in September 2020. Inflation had increased in December 2023 as a result of a base effect in energy prices, and remained high at 2.9%. At the same time, most measures of underlying inflation had continued their downward trajectory as the effects of past supply shocks diminished and the impact of tight monetary policy reduced demand. The Governing Council confirmed its assessment that the key ECB interest rates were at levels that, maintained for a sufficiently long duration, would make a substantial contribution to inflation returning to its 2% medium-term target in a timely manner. It therefore decided to keep the policy rates unchanged at its January meeting, at the levels decided in September 2023, and reiterated that it would keep policy rates at sufficiently restrictive levels for as long as necessary.

The March ECB staff macroeconomic projections entailed a downward revision of inflation, in particular for 2024, reflecting a lower contribution from energy prices. They pointed to a gradual decrease in inflation over time towards the ECB’s target. Headline inflation had declined in February, but domestic price pressures remained high, driven in part by strong wage growth and declining labour productivity. The euro area economy remained weak. Consumer spending was assessed to have been restrained, investment to have slowed and exports to have decreased, owing to slower external demand and some loss of competitiveness for euro area firms. ECB staff had revised down their near-term growth projections. The economy was still expected to recover and grow over time, supported initially by consumption and later also by investment. In particular, real incomes were expected to rebound, as a result of declining inflation and rising wages. Even though financing conditions continued to be restrictive, the dampening impact of past interest rate increases on demand was also expected to gradually fade and exports were expected to pick up. Based on its continued data-dependent approach, and its assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, the Governing Council decided in March to keep the three key ECB interest rates unchanged.

The Governing Council also emphasised the importance of advancing the capital markets union to stabilise growth when countries face local shocks that monetary policy cannot address. A more integrated and diversified financial system would enhance private risk sharing across countries, help mitigate financial fragmentation and ensure the effective transmission of monetary policy to all parts of the euro area, among other benefits.

The Governing Council also approved changes to the operational framework for implementing monetary policy in March. The review of the operational framework, which had been announced in December 2022, established key principles and parameters for implementing monetary policy and providing central bank liquidity, against the background of a gradually declining amount of excess liquidity in the banking system (see Box 2). Specifically, the Governing Council decided to continue steering the monetary policy stance by adjusting the deposit facility rate and to provide liquidity flexibly, on the basis of banks’ needs, through a broad mix of instruments, including – at a later stage – structural longer-term credit operations and a structural portfolio of securities. It also approved a reduction in the spread between the rate on main refinancing operations and the deposit facility rate from 50 to 15 basis points, effective from 18 September 2024.

Inflation fell further to 2.4% in March, with most measures of underlying inflation easing, confirming the picture of gradually diminishing price pressures. However, services price inflation remained high at 4.0%, driven by domestic price increases. Wages were still growing – looking at the last quarter of 2023 – although at a slower pace than anticipated. The higher labour costs were in part being absorbed by firms’ profits, which limited their impact on consumer prices. At the same time, unit labour cost growth remained elevated as a result of weak productivity growth, but was decreasing from its previously high level.

As the year progressed, it became increasingly clear that the Governing Council’s restrictive monetary policy was having a significant impact on the economy and thereby on inflation. In the first quarter of 2024 high borrowing costs for businesses and households as well as tighter credit standards led to reductions in investment plans and house purchases, as well as a further decline in credit demand. While spending on services remained robust, manufacturing firms faced weak demand. Production levels continued to be subdued, especially in energy-intensive sectors. However, euro area export growth was expected to accelerate, supported by a stronger global economy and increased demand for tradable goods.

In April the Governing Council announced that it would keep the three key ECB interest rates unchanged, in restrictive territory. It emphasised its commitment to a data-dependent, meeting-by-meeting approach, with no pre-commitment to a particular rate path. The Governing Council communicated for the first time that it would be appropriate to reduce the level of monetary policy restriction if its assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission were to further increase confidence that inflation was converging to the target in a sustained manner.

This moment arrived in June, and the Governing Council decided to lower the three key ECB interest rates by 25 basis points, after nine months of holding rates steady. Since the September 2023 meeting, when the Governing Council had last raised rates, inflation had fallen by 2.6 percentage points and the inflation outlook had improved markedly. Measures of underlying inflation had also eased, reinforcing the signs that price pressures had weakened, and inflation expectations had declined at all horizons. Monetary policy had kept financing conditions restrictive. By dampening demand and keeping inflation expectations well anchored, this had made a major contribution to bringing inflation back down.

Despite these positive developments, domestic price pressures remained strong and wage growth remained elevated, compensating for the previous surge in inflation. Inflation was seen as likely to stay above target well into the following year. Eurosystem staff had slightly revised up their inflation projections for 2024 and 2025 compared with March, anticipating fluctuations in inflation for the rest of 2024, including due to energy-related base effects. Inflation was, however, then expected to decline towards the target over the second half of 2025, owing to weaker growth in labour costs, the unfolding effects of restrictive monetary policy, and the fading impact of the energy crisis and the pandemic.

Inflation rose to 2.6% in May, although both food and goods price inflation declined. Energy price inflation experienced a modest uptick after a year of negative annual rates, and services price inflation increased to 4.1% from 3.7% in April.

Following five quarters of stagnation, the euro area economy had grown by 0.3% in the first quarter of 2024. The services sector was expanding, while manufacturing showed signs of stabilisation at low levels. Employment had increased by 0.3% in the first quarter, with around 500,000 new jobs created since December 2023. The economy was expected to remain subdued in the near term, and then recover, supported by higher wages, better terms of trade and higher real incomes. Financing costs had plateaued at restrictive levels and credit remained weak as a result of past policy rate increases. In addition, banks repaid a large amount of funds borrowed under TLTRO III in June 2024, following the large repayment in March, which led to a substantial reduction in excess liquidity.

The Governing Council also confirmed in June that it would reduce the Eurosystem’s holdings of securities under the PEPP by €7.5 billion per month on average over the second half of the year. This would largely mirror the approach employed for the APP.

At the time of the July Governing Council meeting, in line with expectations, most inflation measures for June were either stable or declining, although domestic price pressures and services inflation remained elevated. Wages continued to grow at an elevated rate, while their impact on inflation was still to some extent mitigated by profit margins. The incoming information broadly supported the previous assessment of the medium-term inflation outlook, and the Governing Council decided to keep policy rates unchanged at its July meeting. It reaffirmed its intention to keep monetary policy restrictive for as long as necessary.

Inflation dropped to 2.2% in August, from 2.6% in July. Domestic price pressures and services inflation nonetheless remained high, mainly owing to rising wages. Labour cost pressures continued to ease, but also remained elevated. The September ECB staff projections confirmed the previous inflation outlook, reinforcing the view of a gradual and sustainable return of inflation to 2%. Inflation was expected to rise over the year-end and decline towards the target over the second half of 2025. As services inflation had been higher than expected, the projections for core inflation (inflation excluding energy and food) in 2024 and 2025 were revised up slightly but continued to suggest a rapidly declining path.

Financing conditions remained restrictive and credit growth sluggish amid weak demand at the time of the Governing Council’s September meeting, while economic activity was subdued. In the second quarter of 2024 the economy had grown by 0.2%, at a slower pace than in the first quarter and below expectations. Growth had been driven mainly by net exports and government spending. Private consumption and investment, which had been expected to lead the recovery, remained weak, likely because of high geopolitical risks. As a result, ECB staff had revised down their growth projections compared with June, reflecting a weaker contribution from domestic demand over the coming quarters. The economy was expected to strengthen over time and grow by 0.8% in 2024, rising to 1.3% in 2025 and 1.5% in 2026. This recovery would be supported by higher consumption, the gradually fading effects of restrictive monetary policy and rising global demand and exports.

In light of the new information at hand, which strengthened confidence in a gradual decline in inflation towards the ECB’s target, the Governing Council decided in September to lower the deposit facility rate – the rate through which it steers the monetary policy stance – by 25 basis points, marking a further step in moderating the degree of monetary policy restriction. As already announced on 13 March 2024, some changes to the operational framework for implementing monetary policy took effect from 18 September (see Box 2). Notably, the spread between the interest rate on the main refinancing operations and the deposit facility rate was adjusted to 15 basis points, while the spread between the rate on the marginal lending facility and the rate on the main refinancing operations remained unchanged at 25 basis points. In September excess liquidity in the euro area fell below €3 trillion, primarily owing to banks repaying loans under the TLTRO III operations. The gradual phasing-out of reinvestments of maturing bonds in the Eurosystem’s monetary policy portfolios increasingly contributed to this decline.

In September inflation declined to 1.7%, its lowest level since April 2021, reinforcing confidence that the disinflationary process was well on track. Most measures of underlying inflation either declined or were unchanged in September. Energy prices saw a significant decline, with an annual rate of -6.1%, and most measures of longer-term inflation expectations hovered at around 2%. The inflation outlook was influenced by weaker than expected economic activity. According to short-term indicators, manufacturing output was continuing to fall. Although services activity seemed to have benefited from a robust summer season, short-term indicators pointed to a decline in the third quarter of 2024. Firms were increasing investments at a slow pace, while exports weakened. Despite an increase in incomes, households had opted to consume less in favour of savings in the second quarter of 2024, the last quarter for which data were available. In response to these dynamics and their implications for inflation, the Governing Council decided to moderate the degree of monetary policy restriction further and lower the key ECB interest rates by 25 basis points in October, bringing the deposit facility rate to 3.25%.

As the year came to a close, the flash estimate showed inflation to have increased slightly to 2.3% in November, from 2.0% in October. This increase was anticipated and was driven by an earlier fall in energy prices that dropped out of the annual rates. While food and services prices decreased, domestic inflation remained high, owing to wage pressures and the fact that some services sectors were still adjusting with a delay to the past inflation surge. Meanwhile, underlying inflation was developing overall in line with a sustained return of inflation to target. In the December projections, Eurosystem staff saw headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System would become operational.

The euro area economy had grown by 0.4% in the third quarter of 2024, exceeding expectations, mainly driven by an increase in consumption and by firms building up inventories. At the same time, investment remained low, amid high uncertainty. Short-term indicators available for the fourth quarter of 2024 suggested that growth was losing momentum. Surveys indicated that manufacturing was still contracting and growth in services slowing. The labour market continued to show resilience. The euro area unemployment rate had been 6.3% in October 2024, unchanged from September. It had fallen almost uninterruptedly since September 2020 (8.6%), and in November it would reach its lowest level (6.2%) since the introduction of the euro. Although financing conditions remained restrictive, the recent interest rate cuts were gradually making it less expensive for firms and households to borrow. The December staff projections saw the economy strengthening over time, although at a slower pace than previously anticipated. Higher real wages were expected to strengthen household spending, while cheaper credit should stimulate consumption and investment. Provided trade tensions did not escalate, exports were seen as likely to support the recovery as global demand rose.

Against this background, the Governing Council decided at its December meeting to lower the key ECB interest rates by 25 basis points, and reaffirmed its commitment to ensuring that inflation would stabilise sustainably at the 2% medium-term target. The statement that policy rates would be kept sufficiently restrictive for as long as necessary was no longer included in communication. The reduction in the key ECB rates brought the deposit facility rate to 3.00% and its cumulative decrease over 2024 to 100 basis points (Chart 2.1).

December also marked the end of two measures that played a key role in the low inflation era and during the pandemic: the PEPP and TLTRO III. The Governing Council ended reinvestments under the PEPP at the end of 2024. As of January 2025 the Eurosystem no longer reinvests the principal payments from maturing securities held in the PEPP portfolio. In addition, banks repaid the remaining amounts borrowed under the TLTROs on 18 December, concluding this part of the balance sheet normalisation process. Policy interest rates remain the main tool for ensuring a sustained return of inflation to target.

2.2 Normalising the Eurosystem balance sheet

In 2024 the Eurosystem balance sheet continued the gradual normalisation that had started in 2022. By the end of the year it had decreased to €6.4 trillion (from €6.9 trillion at the end of 2023). The reduction stemmed from early repayments and the maturing of TLTRO III operations, and from the decline in the APP portfolio and to some extent also in the PEPP portfolio, the latter portfolio moving to partial reinvestments as of July.

At the end of 2024 monetary policy-related assets on the Eurosystem balance sheet amounted to €4.3 trillion, a decline of €0.8 trillion compared with the end of 2023. Loans to euro area credit institutions accounted for 1% of total assets (down from 6% at the end of 2023) and holdings of assets purchased for monetary policy purposes represented 67% of total assets (compared with 68% at the end of 2023). The other financial assets on the balance sheet, mainly foreign currency-denominated assets, gold and euro-denominated non-monetary policy portfolios, increased by €0.3 trillion.

On the liabilities side, the overall amount of credit institutions’ reserve holdings and recourse to the deposit facility decreased to €3.0 trillion at the end of 2024 (from €3.5 trillion at the end of 2023) and represented 47% of total liabilities (compared with 51% at the end of 2023). Banknotes in circulation were virtually unchanged at €1.6 trillion and accounted for 25% of total liabilities (up from 23%).

APP and PEPP portfolio developments

The Eurosystem ended net asset purchases under the PEPP as of 1 April 2022 and under the APP as of 1 July 2022. It subsequently continued to fully reinvest the principal payments from maturing securities purchased under the programmes to maintain ample liquidity conditions and an appropriate monetary policy stance. For the APP, the Eurosystem discontinued reinvestments as of July 2023. For the PEPP, principal payments from maturing securities were still reinvested in full in the first half of 2024, and in the second half of the year the portfolio was reduced by €7.5 billion per month on average. Reinvestments under the PEPP were discontinued altogether at the end of December 2024. The APP and PEPP portfolios are expected to decline at a measured and predictable pace, as the Eurosystem no longer reinvests any principal payments from maturing securities.

APP holdings declined from €3.0 trillion (at amortised cost) at the end of 2023 to €2.7 trillion at the end of 2024. The public sector purchase programme (PSPP) accounted for the bulk of these holdings, with €2.1 trillion or 79% of total APP holdings at the end of the year. The weighted average maturity of the PSPP holdings stood at 6.86 years at the end of 2024, with some variation across jurisdictions. The asset-backed securities purchase programme (ABSPP) accounted for less than 1% (€7 billion) of total APP holdings at year-end, the third covered bond purchase programme (CBPP3) for 9% (€253 billion) and the corporate sector purchase programme (CSPP) for 11% (€288 billion).

At the end of 2024 PEPP holdings amounted to €1.6 trillion (at amortised cost). Covered bond holdings accounted for less than 1% (€6 billion) of the total, corporate sector holdings for 3% (€45 billion) and public sector holdings for 97% (€1.6 trillion).^[15] The weighted average maturity of the PEPP public sector securities holdings stood at 7.14 years at the end of 2024.

The Eurosystem continued to tilt its remaining corporate securities purchases towards issuers with a better climate performance. In 2024 the ECB published its second climate-related financial disclosures, expanding the scope to include also the Eurosystem’s public sector and covered bond portfolios held for monetary policy purposes (under both the APP and the PEPP), with a section on the ECB’s foreign reserves – see Section 11.5. The ECB also published its second account of climate-related information about non-monetary policy portfolios, namely the ECB’s staff pension fund and own funds portfolios.

The gradual discontinuation of reinvestments was implemented smoothly and was well absorbed by financial markets.^[16]

Redemptions of private sector securities under the APP and PEPP amounted to €74 billion in 2024, while redemptions of public sector securities under the PSPP and PEPP totalled €466 billion. Reinvestments under the PEPP amounted to €2.6 billion for private sector securities and €157 billion for public sector securities. Corporate and covered bond reinvestment purchases under the PEPP were guided by benchmarks reflecting the market capitalisation of all eligible outstanding corporate and covered bonds respectively. Given the large and unevenly distributed redemptions, the public sector reinvestments were smoothed across jurisdictions and across time to ensure a regular and balanced market presence, giving due regard to market price formation and market functioning considerations. This smoothing mechanism led to temporary deviations of the PEPP holdings from the allocation in accordance with the Eurosystem capital key, but these were largely reversed by the end of the smoothing period, which is the calendar year in which the redemptions take place.^[17]

The assets purchased under the PSPP, CSPP, CBPP3 and PEPP continued to be made available for securities lending to support bond and repo market liquidity. In 2024 collateral availability improved significantly compared with previous years, which was reflected in lower lending volumes.

Developments in Eurosystem refinancing operations

At the end of 2024 the outstanding amount of Eurosystem refinancing operations was €34 billion, a decline of €376 billion compared with the end of 2023. This change mainly reflects the termination of the TLTRO III series, with voluntary repayments and maturing operations amounting to €392 billion. Thus the weighted average maturity of outstanding Eurosystem refinancing operations decreased from 5.2 months at the end of 2023 to 1.3 months at the end of 2024.

Developments in eligible marketable assets and mobilised collateral

The nominal amount of marketable assets eligible as collateral for Eurosystem refinancing operations increased by €526 billion in 2024, reaching a level of €19.3 trillion at the end of the year (Chart 2.3). Central government securities continued to be the largest asset class (€10.4 trillion). Other major asset classes included unsecured bank bonds (€2.2 trillion), corporate bonds (€2.0 trillion) and covered bank bonds (€1.9 trillion). Regional government securities (€644 billion), asset-backed securities (€617 billion) and other marketable assets (€1.6 trillion) each accounted for a smaller fraction of the eligible asset universe.

In 2024 mobilised collateral declined by €231 billion to €1.5 trillion (Chart 2.4). This corresponds to 60% of the net reduction in the outstanding amount of Eurosystem refinancing operations over the course of the year. More than half of the decline in mobilised collateral occurred following the maturing of the TLTRO III operation in March 2024, which accounted for more than €135 billion in demobilised collateral. For the remainder of the year, the overall value of mobilised collateral remained relatively stable. Looking at developments by asset class, the largest decline was observed for credit claims, followed by asset-backed securities, covered bank bonds and corporate bonds.

Review of additional credit claim frameworks and related collateral types

In November 2024 the ECB announced changes to the Eurosystem collateral framework which affected “additional credit claims” and related collateral types.^[18] These changes aim to foster greater harmonisation, flexibility and risk efficiency of the collateral framework, while also preserving its broadness. In line with these aims, the Governing Council decided to integrate certain temporary measures into the general collateral framework and in parallel, also in view of the maturing of the final TLTROs and the resulting decline in aggregate collateral needs, to discontinue temporary collateral measures that were no longer needed.^[19]

The temporary measures that will be integrated into the general framework include the acceptance as collateral of the following asset categories: i) asset-backed securities with a second-best rating of credit quality step 3 on the Eurosystem’s harmonised rating scale and which fulfil the eligibility criteria stipulated in the Guideline on temporary collateral measures (the “temporary framework”)^[20]; and ii) marketable assets denominated in US dollars, pounds sterling and Japanese yen. Besides this, national central banks’ statistical in-house credit assessment systems will be accepted as an additional credit assessment source (see Section 2.3).

The ECB will continue phasing out temporary crisis-related collateral easing measures that are no longer needed, building on its previous decisions of 24 March 2022 and 30 November 2023. The discontinuation encompasses the following items relating to asset types which have been eligible under the temporary framework: i) private individuals as eligible debtors, and pools of credit claims backed by real estate assets as eligible asset types, for additional credit claims; ii) individual credit claims with a credit quality below credit quality step 3; and iii) foreign currency-denominated loans in US dollars, pounds sterling and Japanese yen. Furthermore, the ECB will phase out the temporary easing of certain technical requirements for the eligibility of additional credit claims, such as for those credit claims benefiting from a COVID-19-related partial public sector guarantee. Moreover, it will also discontinue the eligibility of retail mortgage-backed debt instruments and non-marketable debt instruments backed by eligible credit claims, which have been eligible under the General Documentation Guideline on the implementation of the Eurosystem monetary policy framework^[21],[22].

In addition to these decisions, the Governing Council mandated the relevant Eurosystem committees to carry out preparatory work on the future integration of pools of non-financial corporate credit claims into the general framework, including an adequate risk control framework and all necessary technical requirements.

These changes will ensure the maintenance of a broad collateral framework for refinancing operations, which will continue to be conducted through fixed rate tender procedures with full allotment, and will help ensure that the ECB’s policy implementation remains effective, robust, flexible and efficient in the future, in line with the revised operational framework for implementing monetary policy.

2.3 Managing financial risks of monetary policy instruments

The Eurosystem continuously manages the financial risks inherent in the implementation of its monetary policy operations. Its risk management function endeavours to attain risk efficiency, i.e. to achieve monetary policy objectives with the lowest amount of risk.^[23]

The ECB kept its key interest rates unchanged in the first part of 2024 to ensure a timely return of inflation to the 2% medium-term target (see Section 2.1). This kept the cost of liabilities on the balance sheets of Eurosystem central banks high, while the income generated on their APP and PEPP securities portfolios and TLTRO III remained low. The mismatch produced negative net interest income for most central banks in the Eurosystem. For some of these central banks, the negative net interest income can be offset against financial buffers built up in previous years. Any losses that cannot be offset can be recorded on the balance sheet of the respective central bank. Such losses will then be offset with future profits. They will not affect the ability of Eurosystem to pursue the price stability mandate and operate effectively. Over time, the Eurosystem’s profitability is expected to improve, as the interest rate mismatch between assets and liabilities will narrow.^[24] In accordance with the principles laid out in the context of the changes to the operational framework for implementing monetary policy announced by the Governing Council in March 2024 (see Box 2), the framework will over the long run preserve the financial soundness of the Eurosystem balance sheet, supporting central bank independence.

The main change to the Eurosystem’s risk management framework in 2024 was a further diversification of its credit assessment systems for collateral. The risks of the APP and PEPP continued to be managed according to established risk control frameworks, while reinvestments were gradually phased out.

Diversification of credit assessment systems used to assess collateral

2024 was marked by the integration of an additional credit assessment system into the Eurosystem credit assessment framework (ECAF). The ECAF is one of the tools used to mitigate the credit risk of assets used in monetary policy operations. It defines the procedures, rules and techniques which ensure that the Eurosystem requirement of high credit standards for all eligible assets is met. The ECAF draws on credit assessment systems belonging to one of three sources: external credit rating agencies (referred to as external credit assessment institutions or ECAIs), the in-house credit assessment systems of national central banks (NCBs), and counterparties’ internal ratings-based systems.

Following the acceptance of Scope Ratings GmbH in 2023 as the fifth ECAI, the process of integrating its ratings into the Eurosystem IT infrastructure was concluded in 2024. From 16 December 2024 the Eurosystem began using the ratings provided by Scope Ratings GmbH for the assessment of the credit quality of marketable assets to be pledged as collateral for monetary policy operations. These ratings are now used alongside the ratings of the already accepted ECAIs (Morningstar DBRS, Fitch Ratings, Moody’s and S&P Global Ratings) and include asset-backed security ratings, for which Scope Ratings GmbH successfully established compliance with the Eurosystem eligibility requirements in the course of 2024.

The Governing Council also decided to introduce statistical in-house credit assessment systems (S-ICASs) of Eurosystem NCBs into the general collateral framework for monetary policy. In response to the COVID-19 pandemic, the Governing Council had decided in April 2020 to widen the scope of credit assessment systems that could be used in the NCBs’ additional credit claims frameworks, including NCBs’ own conservative credit assessment approaches. Some NCBs subsequently began to use S-ICASs, which assess the creditworthiness of non-financial corporate debtors/guarantors of additional credit claims under the temporary collateral framework (see Section 2.2.4) using mostly quantitative methodologies, in addition to their regular in-house credit assessment systems, which also require expert judgement. On 19 December 2024, the Governing Council approved a harmonised framework for S-ICASs, so that these systems will be accepted as an additional credit assessment source in the general collateral framework.^[25] All currently existing S-ICASs need to ensure that they become compliant with this harmonised framework. S-ICASs help to ensure a broad collateral universe, including collateral based on bank lending to the corporate sector, in particular small and medium-sized entities.

Managing risks of the asset purchases in the APP and PEPP

In 2024 the principal payments from maturing securities under the PEPP continued to be reinvested, first in full and then partially, while maturing securities under the APP have not been reinvested since mid-2023 (see Section 2.2.1). Both programmes, conducted for monetary policy purposes, are composed of different types of asset class, namely public sector and corporate sector debt securities as well as asset-backed securities and covered bonds. The financial risks of these programmes are managed on the basis of specific financial risk control frameworks that take into account each programme’s policy objectives and the risk profiles of the different asset classes. The frameworks consist of eligibility criteria, credit risk assessments and due diligence procedures, pricing frameworks, benchmarks and limits. As during the net purchase phase, they will continue to apply to the holdings for as long as they remain on the Eurosystem’s balance sheet. The key elements of these frameworks, as summarised in Section 2.3 of the ECB’s Annual Report 2022, Table 2.1, are still valid.

In 2024 financial stability risks and vulnerabilities in the euro area remained elevated, with concerns shifting from inflation remaining high to an increase in downside risks to growth. Moreover, geopolitical risks and economic policy uncertainty were on the rise, increasing the likelihood of tail events occurring. In this context, national authorities sought to ensure sufficient macroprudential policy space to counteract any risks that might materialise. The associated build-up of releasable buffers was facilitated by elevated bank profitability, helping banks remain resilient after the progress they had made in previous years and their continuous supervisory engagement. Significant headway was made on completing a robust regulatory framework for the financial sector – notably the transposition of the final Basel III reforms into EU law for banks, as well as preparatory work on non-bank financial intermediation (NBFI) and the capital markets union.

3.1 The financial stability environment in 2024

Financial stability vulnerabilities in the euro area remained elevated in 2024, with the key risks shifting from concerns about inflation remaining high to fears over growth. As consumer price inflation eased, the interest rate cycle in the euro area and several other major advanced economies turned. Lower benchmark interest rates helped to bring down financing costs overall, although there were still some pockets of vulnerability associated with constrained debt servicing capacity among some borrowers. Sovereign vulnerabilities rose in some euro area countries amid fiscal challenges and concerns about low productivity contributing to weak economic growth. At the same time, geopolitical risks and economic policy uncertainty were also on the rise. This and some short-lived bouts of volatility notwithstanding, financial markets and the banking system remained robust. Nevertheless, those episodes of volatility highlighted underlying financial system vulnerabilities in the face of adverse dynamics. Accordingly, the financial stability outlook for the euro area remains fragile.

Sovereign vulnerabilities, while still contained for the euro area as a whole, increased for some countries in 2024. Concerns emerged over sovereign debt sustainability owing to geopolitical and policy uncertainty, as well as high sovereign debt and deficit levels in some countries against the background of sluggish trend growth. This led to widening sovereign spreads for some countries – most notably France following its summer elections and a period of political uncertainty – culminating in credit rating downgrades towards the end of the year. Given the concerns about euro area growth and productivity over the medium term, high borrowing costs and weak fiscal fundamentals could reduce countries’ fiscal space to support their economies against future adverse shocks. Furthermore, increases in benchmark sovereign yields could have repercussions for the broader economy.

Overall, the euro area corporate sector remained resilient in 2024. High interest rates continued to weigh on profitability, which led to the number of defaults increasing significantly in some sectors and countries, although default rates remained low. The debt servicing capacity of small and medium-sized enterprises (SMEs) appeared to be particularly vulnerable to slowing economic activity and high borrowing costs. At the same time the commercial real estate sector suffered further losses over the year as a result of both cyclical and structural challenges. However, the relatively modest size of that sector mitigated any systemic impact on the banking sector.

Vulnerabilities in the euro area household sector eased owing to lower debt levels, resilient labour markets, strong income growth and high saving rates. However, the debt servicing capacity of households with low incomes and those with floating rate mortgages was challenged and could be further undermined if growth slows and labour markets weaken. Residential real estate markets remained stable, but risks lingered in those with elevated mortgage debt levels and overvalued property markets.

Euro area and global financial markets experienced several episodes of volatility in 2024, driven by heightened macro-financial and geopolitical uncertainty. Although spillovers to the euro area were contained, those episodes highlighted underlying financial market vulnerabilities. Record low equity risk premia and compressed corporate bond spreads indicate that investors might have been underpricing the likelihood of adverse scenarios. Furthermore, the high concentration of stock market capitalisation among a handful of US technology companies raised concerns about an AI-related asset price bubble and made portfolios more vulnerable to sudden price corrections and amplification dynamics (see Box 3). With the deepening integration of global equity markets, market risk sentiment was highly sensitive to negative surprises, increasing the potential for sharp market corrections and adverse global spillovers.

From early 2023 the Common Equity Tier 1 (CET1) ratios of euro area banks had stood around 15%, putting them on a sound footing to preserve their resilience through multiple periods of uncertainty in 2023 and 2024. Although SME and commercial real estate portfolios recorded losses in some euro area countries in 2024, non-performing loan (NPL) ratios remained close to historical lows, and banks’ solid capital and liquidity buffers enabled them to comfortably absorb any losses. Banks also continued to exhibit strong profitability growth, driven by, among other things, high net interest margins and lower operating expenses.

The NBFI sector remained resilient to bouts of market volatility in 2024 and continued to support market-based finance in the euro area across all credit risk categories. However, vulnerabilities related to concentrated exposures, liquidity mismatches and high leverage in parts of the investment fund sector were still a concern. There was the possibility of valuation shocks leading to sudden fund outflows and margin calls, amplifying adverse market dynamics and creating spillovers to other parts of the financial system. This risk remained particularly pertinent as non-bank portfolios were subject to increased credit risk in an environment of geopolitical uncertainty and weakening economic growth.

Several structural issues, including climate-related risks and cybersecurity weaknesses, continued to weigh on financial stability, potentially amplifying existing vulnerabilities. Furthermore, the rising level of geopolitical fragmentation raised concerns about a reversal of the global economic, trade and financial integration achieved so far. Such structural vulnerabilities call for prudence as they increase the potential for further volatility, particularly if they were to materialise during a period of cyclical weakness and create adverse feedback loops.

3.2 Macroprudential policy: ensuring resilience in times of headwinds and uncertainty

The ECB has the task of assessing macroprudential capital measures proposed by national authorities for banks in countries participating in the Single Supervisory Mechanism (SSM). Importantly, it also has the power to apply more stringent capital measures if necessary. The ECB’s close monitoring of national macroprudential policy stances in 2024 did not identify a need for this, as several countries had already implemented new macroprudential measures to strengthen the resilience of their banking systems to accumulated vulnerabilities and downside risks.

Preserving the resilience of the financial system remains essential

In June 2024 the Governing Council issued a statement calling on national macroprudential authorities to maintain current capital buffer requirements in order to preserve the resilience of the banking sector and ensure that buffers are available in case the banking sector or macro-financial conditions deteriorate. The statement also noted that a further build-up of releasable capital buffer requirements to address vulnerabilities and enhance macroprudential space remained desirable in some countries while prevailing banking sector conditions were limiting the risks of procyclicality. The Governing Council also called on national authorities to maintain existing borrower-based measures to preserve sound and sustainable lending standards. In December 2024 the ECB enhanced its framework for assessing capital buffers of other systemically important institutions (O-SIIs) to take into account the systemic importance of O-SIIs for the banking union as a whole. The enhanced floor methodology is due to have been implemented in full by 1 January 2028.^[26]

Against this background, national authorities continued to tighten macroprudential policy in 2024 to boost the resilience of banks, with all banking union countries having implemented some form of releasable buffer requirement by the end of the year. This was facilitated by banks’ profitability and capital headroom, which remained high on average. In 2024 three euro area countries announced the introduction of the countercyclical capital buffer, while one country announced the introduction of the systemic risk buffer.^[27] This reflects the ongoing efforts of many national authorities to enhance macroprudential space in the form of releasable capital buffers, even when cyclical risk conditions in their countries do not point to an elevated risk environment.^[28] Moreover, some countries adjusted the O-SII buffer levels for individual institutions following the full implementation of the O-SII floor methodology on 1 January 2024. Finally, in addition to capital-based measures, two countries announced the implementation of borrower-based measures, bringing the number of countries with such measures in place to 17.^[29]

The ECB communicated its analysis and views on macroprudential policy topics in 2024. In the macroprudential policy chapters of the May and November issues of its Financial Stability Review, it underlined its strong support for regulatory initiatives aimed at creating macroprudential space and at improving the efficiency and effectiveness of the EU macroprudential framework for banks.^[30] It also continued to analyse the financial stability implications of legal initiatives to impose extraordinary taxes on credit institutions and highlighted its concerns in three opinions.^[31] Finally, the ECB reiterated the importance of enhancing the macroprudential framework for non-banks, with a view to helping ensure that they provide a stable source of financing through the financial cycle (see Section 3.4).

Cooperation with the European Systemic Risk Board

The ECB hosts the secretariat of the European Systemic Risk Board (ESRB) and provides it with analytical, statistical, logistical and administrative support.^[32] In addition to this regular support, the ECB continued in 2024 to make major contributions to the work of the ESRB. This included co-chairing the ESRB’s Instruments Working Group (IWG), Analysis Working Group (AWG) and Task Force on Stress Testing. The ECB’s analytical and modelling competence was of particular benefit to the work of the Task Force on Stress Testing in developing the adverse scenario for the 2025 EU-wide stress tests of the European Banking Authority (EBA) and in conducting the first liquidity stress test covering the entire EU financial system. Related to this, the ECB also co-chaired a team that drew up a framework for monitoring systemic liquidity risk.

In addition, the ECB co-authored with the ESRB a report on Member States’ increased use of the countercyclical capital buffer to build up resilience early in the financial cycle and thereby mitigate the impact of credit crunches.^[33] It also continued to support the ESRB’s work on a wide range of topics, notably: (i) macroprudential tools for cyber resilience;^[34] (ii) monitoring vulnerabilities related to NBFI;^[35] iii) vulnerabilities in the real estate sector and follow-up work related to the ESRB recommendation of 2023 on commercial real estate;^[36],[37] (iv) macroprudential implications of interest rate changes; and (v) the implications for macroprudential policy of heightened uncertainty and emerging risks (particularly in relation to geopolitical, climate and technological developments). Finally, the High-Level Group on the ESRB Review conducted a second review of the ESRB Regulation^[38], examining the ESRB’s work and experiences over the past decade. The Group made proposals for enhancing the ESRB’s macroprudential oversight capacity, notably through a more holistic assessment of systemic risk that takes into account interconnections, interdependencies and spillovers.^[39] More detailed information can be found on the ESRB’s website and in its Annual Reports.

3.3 Microprudential activities to ensure the safety and soundness of individual banks

European banks remained resilient throughout 2024. Banks directly supervised by the ECB maintained solid capital and liquidity positions. In the third quarter of 2024 the aggregate CET1 ratio stood at 15.72% and overall liquidity conditions remained favourable. The NPL ratio stood at around 2.3% in the third quarter of 2024, close to its historical low. Bank profitability remained strong, driven primarily by higher interest rates.

Nevertheless, banks were faced with a prolonged period of sustained geopolitical tensions, marked by high uncertainty and increased volatility, as well as a challenging risk landscape, including climate-related and environmental risks. Consequently, the ECB’s supervisory work remained focused on the effectiveness of internal control functions and governance arrangements, and on ensuring supervised banks had sufficient capital to withstand credible adverse scenarios.

Against this backdrop, the 2024 Supervisory Review and Evaluation Process (SREP) did not result in major changes to banks’ scores or overall Pillar 2 requirements. The overall capital requirements and guidance increased slightly to 15.6% of risk-weighted assets, up from 15.5% in 2023.^[40]

In 2024 ECB Banking Supervision continued to focus strongly on credit risk management, addressing shortcomings in IFRS 9 frameworks and conducting targeted reviews of real estate and SME portfolios to mitigate asset quality deterioration. Deficiencies in risk data aggregation and reporting, which hinder effective decision-making, prompted greater supervisory efforts to improve banks’ information systems and to address IT security vulnerabilities. Operational and ICT risk remained a concern, underscoring the need to speed up the digitalisation process and strengthen cyber resilience. The ECB conducted a cyber resilience stress test, which showed that banks had response and recovery frameworks in place, but that there were still areas for improvement. With regard to climate-related and environmental risks, the ECB continued to monitor banks’ compliance with the deadlines they were given in 2022 to meet all supervisory expectations by the end of 2024. As in 2023, the supervisory exercises were followed up with ongoing dialogue, feedback letters and, where necessary, binding supervisory decisions envisaging the accrual of periodic penalty payments.^[41] The ECB also made use of forward-looking tools to assess the alignment of banks’ financing with EU climate objectives.

Over the course of 2024 ECB Banking Supervision continued to pursue a risk-based and agile approach. In May the Supervisory Board decided to launch a reform of the SREP with a view to (i) focusing risk assessments by strengthening the multi-year approach, (ii) better integrating supervisory activities, (iii) using the full supervisory toolkit, (iv) enhancing communication, (v) making methodologies stable, and (vi) making better use of IT systems and analytics. In addition, the ECB and EBA established a Joint Bank Reporting Committee to harmonise and integrate data reporting by the banking industry with the goal of improving efficiency and reducing the associated costs.

On 6 November 2024 the SSM celebrated its tenth anniversary. To mark the occasion, the entire year had been made “a year of integration”, with a number of dedicated events, including the launch of the first SSM Foundation Programme. The Programme is part of the training offered by the SSM and aims to foster, among other things, a cohesive supervisory culture across the European banking supervision.

The ECB’s supervisory priorities for 2025-27 aim to (i) enhance banks’ ability to assess and manage macro-financial threats, in particular geopolitical shocks; (ii) ensure they effectively and promptly address persistent shortcomings identified by supervisory scrutiny; (iii) provide them with the wherewithal to tackle fresh challenges arising from digitalisation and the use of new technologies.

As part of its continued efforts to increase transparency, in 2024 the ECB duly considered the comments received during the public consultation on its revised Guide to internal models. The final revised Guide to internal models was then published in February 2024. Over the year the ECB also launched public consultations on its Draft guide on governance and risk culture, on its Guide on outsourcing cloud services to cloud service providers and on the revised policies on the options and discretions (O&Ds) available to supervisory authorities under Union law. It also published a comprehensive methodology for assessing interest rate and credit spread risks, and updated the SREP methodology for operational and ICT risk. Lastly, the ECB published best practices on IFRS 9 provisioning overlays and on intraday liquidity risk management.

Three banks were sanctioned by the ECB in 2024.^[42]

On 5 June 2024 the Governing Council appointed three new ECB representatives to the Supervisory Board: Sharon Donnery, Pedro Machado and Patrick Montagner.

More detailed information can be found on the ECB’s banking supervision website and in the 2024 ECB Annual Report on supervisory activities.

3.4 The ECB’s contribution to European and global policy initiatives

Significant progress was made in 2024 on improving the regulatory framework for the financial sector. The ECB contributed to the implementation of the final Basel III reforms in the EU and to the proposal for strengthening the EU’s crisis management and deposit insurance framework. Important headway was also made on regulating crypto-assets, with the focus shifting to implementation, and on the digital euro project. At the same time, the ECB participated in the ongoing policy debates and preparations for further legislative work on NBFI and the capital markets union.

Important developments in the regulatory framework for banks

The revised Capital Requirements Regulation^[43] and revised Capital Requirements Directive^[44] – often referred to as the EU banking package – were formally adopted and published in the Official Journal of the European Union on 19 June 2024. In particular, these two legislative acts transposed the final Basel III reforms into EU law, further increasing the resilience of the EU banking system to various risks. They also broadened the supervisory toolkit to include addressing climate-related and other sustainability risks. The ECB contributed to the banking package by providing its technical expertise to the trilogue between the European Commission, the EU Council and the European Parliament. It also supported, and continues to support regulators, in particular the EBA, in starting to implement the elements of the banking package, e.g. through consultation processes on related implementing technical standards and regulatory technical standards. Owing to level playing field considerations, the implementation of the Basel market risk rules in the EU, namely making Fundamental Review of the Trading Book reporting a regulatory requirement, was postponed until January 2026.

In the course of 2024 the European Parliament and the Council of the European Union adopted their positions on the reform of the bank crisis management and deposit insurance framework, following the legislative proposal by the European Commission in April 2023. The goals of the proposal included expanding the scope of resolution to include smaller and medium-sized banks, and providing tools to facilitate the use of deposit guarantee schemes in crisis management. The outcome of the trilogue negotiations should ensure that these objectives are met and strengthen the EU bank crisis management and deposit insurance framework further.

Implementing a regulatory framework for crypto-assets

In 2024 the ECB supported the finalisation and implementation of a regulatory framework for crypto-assets at both the EU and the international level. At the EU level, the ECB provided input on technical standards and guidelines that were coordinated by the EBA and European Securities and Markets Authority for the Markets in Crypto-Assets Regulation.^[45] The ECB also issued an opinion on the proposed regulation and directive on payment and electronic money services, in which it aimed to ensure appropriate safeguards and prudential requirements for e-money tokens, and called for an impact assessment of crypto-lending services.^[46] In international fora, such as the Financial Stability Board (FSB), the focus shifted towards promoting and monitoring the implementation of the regulatory response to crypto-assets. In this regard, the ECB contributed to the FSB-IMF status report on the G20 Crypto-asset Policy Implementation Roadmap. It was also involved in the FSB’s analysis of tokenisation and its implications for financial stability.

Supporting the progress towards the capital markets union and strengthening the NBFI regulatory framework

Throughout the year a number of high-level reports gave fresh impetus to the capital markets union and emphasised the importance of mobilising capital markets to deepen the Single Market and provide adequate financing to innovative and productive firms in Europe.^[47] The ECB participated in the policy debate by setting out priorities in a Governing Council statement on advancing the capital markets union. It also presented three key future objectives for the capital markets union in various publications and speeches, namely (i) ensuring European savings products that are accessible, transparent and affordable so that a larger share of European savings enters into capital markets; (ii) fostering the consolidation of the trading and post-trading landscape; and (iii) developing the financing ecosystem for innovative firms, especially venture capital, which is lagging in Europe.^[48] The ECB also contributed to financial market infrastructure aspects of the capital markets union (see Chapter 4). In addition, it participated in Eurogroup discussions on the future of European capital and financial markets, and contributed to the European Commission’s targeted consultation on the functioning of the EU securitisation framework, which is expected to result in legislative action.

Furthermore, the ECB continued to highlight the importance of addressing structural vulnerabilities in NBFI and improving the relevant policy framework from a macroprudential perspective. It also emphasised the need to move forward with the full and swift implementation of international recommendations aimed at addressing liquidity risk in open-ended and money market funds. The ECB contributed to the Eurosystem’s response to the European Commission’s consultation on macroprudential policies for NBFI.^[49] It was also involved in the FSB’s policy work on liquidity preparedness for margin and collateral calls of non-bank market participants, and actively contributed to the ongoing policy work to address risks stemming from NBFI leverage.^[50]

The Eurosystem plays a central role in developing, operating and overseeing market infrastructures and payments. In 2024 traffic increased across all Eurosystem-operated TARGET Services, whose functionalities, including multi-currency settlement services, further evolved. With a view to enhancing the digitalisation of retail and wholesale payments and securities markets, the Eurosystem laid the groundwork for the potential issuance of a digital euro and successfully completed its exploratory work on the use of distributed ledger technology (DLT) for wholesale transactions settled in central bank money. Evolving cyber threats were addressed from both the operational and the oversight angle. Work on improving global cross-border/cross-currency payments was launched to support the creation of a faster, cheaper, more transparent and more accessible global payments ecosystem.

4.1 TARGET Services

TARGET Services consist of three settlement services: T2, a real-time gross settlement system for euro payment transactions supporting the Eurosystem’s monetary policy operations, bank-to-bank transfers and commercial payments; TARGET2-Securities (T2S), a single platform for securities settlement in Europe; and TARGET Instant Payment Settlement (TIPS), which settles instant payments in central bank money.

The ECB made substantial advancements in the evolution of all TARGET Services in 2024, with concerted efforts directed towards strengthening the ability of T2 and T2S to recover in the event of a major incident (including a cyberattack) and further refining TARGET Services’ functionalities to meet evolving market needs. In order to maintain straight-through processing in a cross-border payments context, T2 messages were upgraded in line with the most recent developments in market standards for high-value payment systems (i.e. HVPS Plus). Notable achievements for T2S include the full deployment of new reporting services, the expansion of functionalities for settlement of transactions with central securities depositories external to the T2S platform, further development of the cash management services for participating banks, and a continuation of work to prepare for the prospective integration of new end-investor markets. Furthermore, the T2S governance bodies played a key role in critical policy and regulatory initiatives, such as the future shortening of the securities settlement cycle in the EU (to T+1) and the review of the settlement discipline regime, with an emphasis on refining the penalty mechanism for improved efficiency. The advancements in the evolution of all TARGET Services have brought significant efficiency gains to the market.

The multi-currency feature of the TARGET Services allows settlement services to be provided in currencies other than the euro, should the respective central banks decide to do so. Until 2024 this feature was used only in T2S for settlement of securities in Danish kroner. Since February 2024 the multi-currency feature has also been used in TIPS for settlement of instant payments in Swedish kronor. It will also be used when settlement of payments in Danish kroner goes live in T2 and TIPS in April 2025.

In addition to the three settlement services (T2, T2S and TIPS), the Eurosystem is developing a new TARGET Service, the Eurosystem Collateral Management System (ECMS), for the management of assets used as collateral in Eurosystem credit operations for all euro area jurisdictions. The launch of the ECMS has been moved from November 2024 to June 2025 to give users more time to complete testing of the ECMS functionalities in a stable environment.

In 2024 payment traffic increased across all TARGET Services. T2 settled on average 421,875 payments per day, representing a 3.2% increase compared with the previous year, which was driven mainly by commercial payments. T2S settled a daily average volume of 791,416 transactions, a 13.1% increase, which was broadly spread across market segments and participants. The further growth in the number of TIPS participants and the start of settlement operations for the first currency other than the euro in February (see above), led to a substantial rise in the number of TIPS payments in 2024. Looking at the euro-denominated volumes, the daily average grew from 963,894 payments in December 2023 to 1,657,421 in December 2024 (+72.0%). Payments denominated in Swedish kronor averaged 2,686,745 per day from February 2024 to the end of the year.

4.2 Innovation and integration in market infrastructure and payments

On 18 July 2024 the Governing Council approved the Eurosystem’s policy on access by non-bank payment service providers (non-bank PSPs) to all euro area central bank-operated payment systems and to central bank accounts.^[51] The policy sets out, as a general principle, that access to euro area central bank-operated payment systems is to be granted to non-bank PSPs that meet all risk-mitigation requirements. The Eurosystem will not offer non-bank PSPs access to accounts for the purposes of safeguarding client funds; the holding of a central bank account implies placing funds necessary to meet settlement obligations. To mitigate central bank-specific concerns from the perspectives of financial stability and monetary policy, the Eurosystem will impose a maximum holding limit on accounts held by non-bank PSPs. The policy follows the enactment of the Instant Payments Regulation^[52], which amended, among other things, the Settlement Finality Directive^[53], to allow non-bank PSPs to participate in designated payment systems. The Eurosystem implemented the policy by way of a Decision adopted by the Governing Council on 27 January 2025^[54], with related updates to the TARGET Guideline^[55] to follow in June 2025.

In August 2024 the ECB published harmonised rules and arrangements for the mobilisation and management of collateral in Eurosystem credit operations, marking a step towards further financial integration in the euro area and the capital markets union.

As part of its ongoing support for the creation of a capital markets union, the Eurosystem’s Advisory Group on Market Infrastructures for Securities and Collateral (AMI-SeCo) continued monitoring compliance of national markets with the T2S harmonisation standards, as well as with the Single Collateral Management Rulebook for Europe (SCoRE) standards and European corporate event standards. The 2024 Corporate Events Compliance Report and the SCoREBOARD report for the second half of 2024 both highlight limited progress and delays on compliance with AMI-SeCo standards, although many outstanding gaps are expected to be closed by June 2025. One driver for compliance is the use of a common messaging standard, as required by the SCoRE standards, which is key for improving the automation of corporate action and triparty collateral management processing. AMI-SeCo’s ISO 20022 Migration Strategy Task Force is developing a strategy for a market-wide transition to ISO 20022, the latest messaging standard available.

During 2024 the Eurosystem successfully completed its exploratory work on testing the use of DLT for wholesale transactions settled in central bank money.^[56] Over the course of six months, 58 distinct use cases were tested. In total, the Eurosystem processed over 200 transactions with a total value of €1.59 billion. 64 entities from nine countries participated in the exploratory work, encompassing central banks, financial market participants and DLT operators.

The findings are currently being analysed to inform the next steps in terms of a European vision for the future of a digital capital markets union.^[57] Throughout 2024 the Eurosystem continued to exchange views with the market in the dedicated New Technologies for Wholesale settlement Contact Group.

Lastly, the EU Issuance Service (EIS) was launched in January 2024. This service, which is used by the European Commission to issue and settle EU debt securities in a safe, efficient and neutral way in T2S, has been used intensively and successfully since its launch. Over €100 billion worth of debt securities have been issued via the central securities depository of the Nationale Bank van België/Banque Nationale de Belgique under the neutrality approach of the EIS.

4.3 Digital euro project

In November 2023 the ECB launched a two-year digital euro project preparation phase to lay the groundwork for the potential issuance of a digital euro. In 2024, the Eurosystem made progress on key milestones and provided regular updates on the progress made. The first digital euro progress report was published in June, and the second digital euro progress report in December. As part of the preparation phase, the ECB is working on a digital euro scheme rulebook, which will be essential to standardise the way the digital euro is used and managed in the euro area. In 2024 the Rulebook Development Group focused on two main tasks: reviewing the first draft of the rulebook and continuing to develop additional sections with the support of seven new Rulebook Development Group workstreams.

The design of a digital euro would rely on state-of-the art technologies to make it cyber-resilient and able to meet user needs. In January the ECB issued calls for applications for potential providers of digital euro components and related services, and was able to make progress on the selection.

Further experimentation and user research activities started in September 2024 to gather insights on user preferences. This included online surveys and interviews with target groups such as small merchants and vulnerable consumer groups. Innovation partnerships with private and public stakeholders were launched to test “conditional payments” and explore other innovative use cases.

The ECB made progress in developing digital euro offline functionality, which would allow payments to be made without an internet connection, with cash-like privacy levels. It explored how to deploy the offline functionality in end-user devices, involving technological, security and operational aspects.

Engagement with stakeholders remained a priority in 2024, with the ECB actively communicating with the public, market participants and policymakers. This included technical sessions with the Euro Retail Payments Board (ERPB), bilateral meetings with market participants and efforts to raise public awareness on the project and foster transparency through seminars on the digital euro with civil society organisations.

Throughout 2024 the ECB provided technical input to support discussions in the European Parliament and the Council of the European Union on the European Commission’s proposal for a Digital Euro Regulation, published in June 2023.

The ECB also regularly engaged with the co-legislators and market stakeholders to provide updates on the progress of the project and gather feedback on the various elements of the holding limit calibration methodology.^[58] Although the holding limit for the digital euro would be set closer to its launch date – to ensure it reflects the economic conditions at that time – in 2024 the ECB started to develop a methodology, covering monetary and economic aspects, aimed at balancing the objectives set out in the draft legislation: to make the digital euro a widely used means of payment and to protect financial stability and the transmission of monetary policy. A dedicated workstream involving ECB experts, with support from the national central banks and national competent authorities, started to identify the key factors influencing the calibration of the holding limit to help establish a coherent methodology that takes these factors into account.

The Governing Council will decide whether to move on to the next phase of the digital euro project by the end of 2025. The decision on whether to issue a digital euro will only be taken once the European Union’s legislative framework has been adopted.

4.4 Oversight and the role of central bank of issue

The safe and efficient functioning of financial market infrastructures and payments in the euro area remains a priority for the Eurosystem in its oversight capacity. In addition, as central bank of issue for the euro, the Eurosystem participates in cooperative arrangements with other overseers or competent authorities for financial market infrastructures with significant euro-denominated activities.

In relation to the oversight of TARGET Services, a key priority was to carry out the first comprehensive assessment following the consolidation of T2 and T2S in 2023. The assessment, which will be finalised in 2025, focused in particular on monitoring the implementation of the risk management framework and the cyber resilience and information security framework of the TARGET Services risk management function. Assessment exercises were also conducted for systemically important payment systems (SIPS) beyond T2, namely EURO1, STEP2-T and the Mastercard Clearing Management System, also to be finalised in 2025, alongside continuous oversight across TARGET Services and all SIPS.

Furthermore, the Eurosystem carried out a review of the ECB Regulation on oversight requirements for systemically important payment systems (SIPS Regulation)^[59] and identified a number of areas for update. The update takes the form of a recast of the Regulation, encompassing new requirements on governance, cyber risk and outsourcing as well as changes in the definition of a SIPS operator to exceptionally include a euro area branch of a legal entity located outside the euro area. A public consultation on the planned recast of the SIPS Regulation was launched in October 2024 and the final recast Regulation will be published in the course of 2025.

The Eurosystem continued its oversight activities covering electronic payment instruments, schemes and arrangements (PISA) under the PISA framework, finalising the onboarding of newly overseen entities and conducting comprehensive assessments of overseen pan-European schemes and arrangements. In the latter half of 2024 the oversight function continued to prepare for the operationalisation of its new responsibilities under the Markets in Crypto-Assets Regulation^[60].

In the area of cyber resilience, the Eurosystem revised its cyber resilience strategy, expanding its reach to include entities overseen under the PISA framework. Furthermore, the European System of Central Banks worked on revising the TIBER-EU framework, also to align with the regulatory technical standards under the Digital Operational Resilience Act (DORA)^[61] for threat-led penetration testing.^[62] The updated TIBER-EU framework was published in February 2025.

As central bank of issue for the euro, the Eurosystem contributed to the work of supervisory and resolution colleges for EU central counterparties (CCPs) and was involved in the ongoing supervision of systemically important third-country CCPs. Regarding securities settlement, the Eurosystem continued the regular review and evaluation of central securities depositories (CSDs) under the CSD Regulation (CSDR)^[63]. It also started performing its role in the authorisation process for entities operating DLT-based market infrastructures under the DLT Pilot Regime Regulation^[64].

The ECB contributed to multiple international work streams from an oversight perspective, including on CCP margins, climate risk and general business risk, as well as on the governance and oversight of interlinking fast payment systems. In the EU regulatory space, the Eurosystem contributed to the development of regulatory technical standards, including under the revised European Market Infrastructure Regulation (EMIR 3)^[65], DORA and the CSDR REFIT (further fine-tuning and clarification of the CSDR framework), in cooperation with the relevant European Supervisory Authorities. Within the context of the EMIR 3 discussions, the ECB continuously monitored developments in the EU clearing landscape and conducted quantitative analyses on regulatory measures such as the EMIR 3 active account requirement. Finally, the ECB and the European Banking Authority published a first joint report on payment fraud, emphasising the effectiveness of strong customer authentication requirements.

The Eurosystem’s swap and repo lines are monetary policy instruments that are used as stabilising tools in times of stress in global financial markets. Euro liquidity lines with non-euro area central banks again provided a backstop to market-based funding. The ECB also continued to offer US dollar operations to eligible euro area counterparties on a regular basis, backed by the standing swap line network of major central banks, comprising the ECB together with the Federal Reserve System, the Bank of Canada, the Bank of England, the Bank of Japan and the Swiss National Bank. No ECB interventions took place in the foreign exchange market during 2024. The ECB remained responsible for the administration of various financial operations on behalf of the European Union and continued to play a coordinating role in relation to the Eurosystem reserve management services framework.

5.1 Developments in market operations

Euro and foreign currency liquidity lines

The Eurosystem’s swap and repo lines are monetary policy instruments that help prevent tensions in international funding markets from hampering the effectiveness of euro area monetary policy transmission. Table 5.1 shows the liquidity lines in operation as of 31 December 2024.

With regard to foreign currency liquidity lines, in 2024 the ECB continued to provide US dollar liquidity on a weekly basis with a seven-day tenor in coordination with the Federal Reserve System, the Bank of Canada, the Bank of England, the Bank of Japan and the Swiss National Bank (the swap line network). Borrowing by euro area counterparties remained very limited throughout the year.

After the ECB’s new framework for the provision of euro liquidity to non-euro area central banks came into effect on 16 January 2024, all of the euro liquidity lines for which extension requests were received were prolonged, initially until 31 January 2025 and then until 31 January 2027.^[66] Drawings on the euro liquidity lines in 2024 were limited.

Reporting on foreign exchange interventions

The ECB did not intervene in the foreign exchange market in 2024. Since the inception of the euro, the ECB has intervened in the foreign exchange market twice – in 2000 and 2011. Data on foreign exchange interventions are published on a quarterly basis with a delay of one quarter on the ECB’s website and in the ECB Data Portal, and are also recapped in Table 5.2. If there were no foreign exchange interventions in the relevant quarter, this is explicitly stated.

The reporting framework covers foreign exchange interventions carried out by the ECB unilaterally and in coordination with other international authorities, as well as interventions “at the margins” within the exchange rate mechanism (ERM II).

5.2 Administration of EU borrowing and lending operations

The ECB is responsible for the administration of accounts and processing of payments relating to the borrowing and lending operations of the EU under the medium-term financial assistance (MTFA) facility^[67] for Member States’ balances of payments, the European Financial Stabilisation Mechanism (EFSM)^[68], the European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE)^[69], the Next Generation EU (NGEU) programme^[70], the Ukraine Facility, including exceptional bridge financing^[71], and short-term macro-financial assistance to the Arab Republic of Egypt^[72]. The ECB is also responsible for the administration of certain payments arising in connection with operations under the European Financial Stability Facility (EFSF)^[73] and the European Stability Mechanism (ESM)^[74], and for processing all payments in relation to the loan facility agreement for Greece^[75]. In 2024 the ECB performed paying agent services for the European Commission^[76].

As at 31 December 2024 the total outstanding nominal amount was €0.2 billion under the MTFA facility, €42 billion under the EFSM, €98.35 billion under SURE and €31.605 billion under the loan facility agreement for Greece. Finally, in 2024 the ECB processed disbursements and interest payments of NGEU loans and grants to and from various Member States, also including loans to Ukraine.

5.3 Eurosystem reserve management services

In 2024 a comprehensive set of financial services continued to be offered within the Eurosystem reserve management services (ERMS) framework established in 2005 for the management of customers’ euro-denominated reserve assets. A number of Eurosystem national central banks provide financial services within this framework ‒ under harmonised terms and conditions and in line with market standards ‒ to central banks, monetary authorities and government agencies located outside the euro area, as well as to international organisations. The ECB performs an overall coordinating role, monitors the smooth functioning of the services, promotes changes to improve the framework and prepares related reports for the ECB’s decision-making bodies.

The number of customer accounts reported in the ERMS stood at 287 at the end of 2024, compared with 273 at the end of 2023. As at the fourth quarter of 2024 the total aggregated holdings (including cash assets and securities holdings) managed within the ERMS framework had increased by approximately 8% compared with the fourth quarter of 2023.

In 2024 the level of banknotes in circulation increased moderately, with cash continuing to be the most widely used means of payment at the point of sale.

The Eurosystem is committed to ensuring that cash remains available, accessible and accepted as means of payment, while also being as sustainable and environmentally friendly as possible. The preparations for the development of a new series of euro banknotes are an opportunity to make euro banknotes more relatable to all Europeans.

6.1 Cash circulation and handling

At the end of 2024 euro banknote circulation amounted to 30.5 billion pieces, with a total value of around €1.6 trillion (Chart 6.1). In terms of number and value, banknotes in circulation grew by 2.4% and 1.3% respectively over the year.

Credit institutions returned 25.4 billion banknotes to the euro area national central banks (NCBs) in 2024, which is a slight decrease of 0.9 billion compared with 2023. In terms of value, the banknotes deposited at the NCBs totalled €856 billion in 2024, down from €890 billion in 2023. This decline was due to credit institutions recirculating higher volumes of banknotes among customers instead of returning them to the NCBs. The change in credit institutions’ handling of banknotes reflects their efforts to improve efficiency, which they have achieved, for example, by installing more ATMs with banknote deposit and recirculation functionality.

In 2024 the increase in euro coin circulation (net issue) in the euro area was similar to that in the previous two years and amounted to 3.0 billion coins with a face value of €953 million.

The ECB strongly welcomes the intention to establish legally binding rules on the legal tender status of euro banknotes and coins in EU law. The adoption of an EU regulation would give citizens greater legal certainty that they can conduct in-person transactions smoothly using cash. Credit institutions have a social responsibility to provide citizens and companies with comprehensive and efficient cash services. In 2024 the ECB and NCBs deepened their analyses of citizens’ access to the cash services offered by credit institutions, identifying a further deterioration in these services in certain areas. The incorporation of protective rules on citizens’ access to cash in EU law is therefore also expressly welcomed.

6.2 Cash usage by consumers and companies

Between September 2023 and June 2024 the ECB conducted a study on payment attitudes of consumers in the euro area to assess their payment behaviour and preferences, as well as their access to various payment instruments. The study showed that cash was the most frequently used payment method at the point of sale and was used in 52% of all transactions. However, the share of cash payments declined, down from 59% in 2022. In terms of value, cards accounted for a higher share of transactions (45%) than cash (39%). The share of online payments in consumers’ day-to-day payments rose from 17% to 21%, while the share of point-of-sale payments fell from 80% to 75%. The study also revealed that a majority of consumers (62% in 2024, up from 60% in 2022) considered it important to have cash as a payment option. At the same time, most euro area consumers (87% in 2024, down from 89% in 2022) reported finding it fairly easy or very easy to get to an ATM or a bank.

In 2024 the ECB published the results of the survey on the use of cash by euro area companies, which shed light on companies’ acceptance of various payment instruments and their strategic views on the use and acceptance of cash. The survey showed that the share of companies that accept cash had fallen from 96% in 2021, down to 88% in 2024. The drop in cash acceptance was particularly sharp among hotels, restaurants and cafés. Of the companies that currently accept cash, 94% said that they intended to continue doing so in the future.

6.3 Counterfeiting and euro banknote development

Some 554,000 counterfeit euro banknotes were withdrawn from circulation in 2024, representing, by historical standards, a small proportion of total banknotes in circulation (Chart 6.2). Although this is a very small proportion, it is higher than in previous years when the number of counterfeits was exceptionally low owing to the COVID-19 pandemic. Overall, around 18 counterfeits were detected per million genuine banknotes in circulation. Thus, there is little likelihood of receiving a counterfeit.

Most counterfeits are of low quality with no or only very poor imitations of security features. Notes can be checked using the simple “feel, look and tilt” method described on the banknote security features web page and on the websites of the euro area NCBs.

Preparations for future euro banknotes

The ECB is preparing to develop a new series of euro banknotes with a view to maintaining their high resilience to counterfeiting and making them as environmentally friendly as possible. This process reflects the Eurosystem’s commitment to cash and is an opportunity to make euro banknotes more relatable to all Europeans.

During 2024 a multidisciplinary advisory group – involving experts in various relevant fields – put together possible motifs to represent the two chosen themes: “European culture” and “Rivers and birds”. On 29 January 2025 the Governing Council selected motifs for both themes and established a design contest jury – involving members from all euro area countries – to support a design contest that is planned for launch later in the year. The ECB is expected to decide in 2026 on the future designs and on when to produce and issue the new banknotes. It will then take several years for the first banknotes to be produced and issued.

The ECB – assisted by the national central banks – develops, collects, compiles and disseminates a wide range of statistics and data needed to support the ECB’s monetary policy, as well as financial stability-related and other tasks of the European System of Central Banks and the European Systemic Risk Board. These statistics are also used by public authorities, international organisations, financial market participants, the media and the general public, and help the ECB to increase the transparency of its work.

In 2024 the ECB expanded the reporting population for money market statistics, making the related dataset more representative. The ECB also published new statistics on financial accounts, namely more detailed data on household holdings of investment fund shares/units, and it started publishing new details on quarterly external statistics for special-purpose entities. Climate-related statistical indicators were also further developed as part of the ECB’s climate and nature plan. The ECB continued to implement its strategy of reducing the reporting burden for banks based on the Integrated Reporting Framework and the Banks’ Integrated Reporting Dictionary.

7.1 Advancing euro area statistics to meet evolving policy needs

Expanded reporting population for euro money market statistics

The increase in the reporting population for money market statistical reporting (MMSR) supports the quality of euro money markets statistics. On 1 July 2024 the MMSR reporting population was expanded with the addition of 24 new banks to the existing 45 reporting banks. The expansion increased the sample size for several euro area countries and extended coverage to Luxembourg and Portugal for the first time.

The data from the new reporting agents will be included in the calculation of the euro short-term rate (€STR) once it has been established that the data are of sufficiently high quality. The expansion of the reporting population supports the representativeness, robustness and reliability of the statistics on euro money markets.

Publication of new statistics on financial accounts

In April 2024 the ECB started publishing data on household holdings of investment fund shares/units broken down by underlying asset and counterparty sector. These data offer deeper insights into households’ indirect exposures via investment funds, enabling more accurate analysis of their financial balance sheet and exposure to various asset classes and counterparties.

In October 2024, following an amendment of the Guideline on the statistical reporting requirements of the ECB in the field of quarterly financial accounts^[77], the ECB started publishing additional data on financial accounts for other financial institutions (OFIs) by subsector. OFIs, which constitute the second-largest financial sector in the euro area after monetary financial institutions (MFIs), primarily provide financing to non-financial corporations (NFCs) and, to a lesser extent, to households and other sectors. They also play a role in channelling funds to and from the rest of the world.

Finally, newly released data on NFC debt securities issuance via financing conduits provide additional information on market-based financing of NFCs in the euro area and euro area countries.

New data on special-purpose entities in external statistics

In April 2024 the ECB started publishing new details on external statistics for special purpose entities (SPEs), as indicated in the amended Guideline on the statistical reporting requirements of the ECB in the field of external statistics^[78]. The new information on quarterly cross-border transactions and positions of SPEs in the euro area and euro area countries, beginning with data for the first quarter of 2020, is aimed at improving the understanding of the role of SPEs in the different components of external statistics.^[79]

7.2 Further development of climate-related statistical indicators as part of the ECB’s climate and nature plan

The ECB publishes three broad sets of climate change-related statistical indicators.

• The sustainable finance indicators give an overview of debt securities with sustainability characteristics that are issued and held by residents in the euro area. They provide information on the proceeds raised to finance sustainable projects and the transition to a net-zero economy.
• Analytical carbon emission indicators for financial institutions supply information on the carbon-intensity of the securities and loan portfolios of financial institutions and thus help to assess the sector’s role in financing the transition to a net-zero economy and the associated risks.
• Analytical indicators on the physical risks of financial institutions’ portfolios assess risks stemming from the impact of climate change-induced natural hazards, such as floods and wildfires, on the performance of loans, bonds and equities.

These indicators are collated in close cooperation within the European System of Central Banks (ESCB) and are part of the ECB’s broader climate and nature plan. They are compiled using several ECB/ESCB and external data collections such as AnaCredit, Securities Holdings Statistics, the Register of Institutions and Affiliates Data (RIAD) and data on greenhouse gas emissions along with physical hazards data from the Risk Data Hub (RDH) of the Disaster Risk Management Knowledge Centre (DRMKC), Copernicus, the Intergovernmental Panel on Climate Change (IPCC) and others.

The indicators were updated in April 2024. The sustainable finance indicators were enriched with new details on the assurance levels of sustainable debt securities. The update of carbon emissions and physical risk indicators included significant conceptual, coverage, consistency and granularity improvements.^[80] Additional breakdowns of the sustainable finance indicators were released in September 2024, and the status of the dataset was upgraded from experimental data to official ESCB statistics.

Work is continuing on all three datasets with the aim of further enhancing the quality of the data and breakdowns available. Other research areas are also being investigated under the auspices of the G20 Data Gaps Initiative, namely the measurement of adaptation expenditure, aspects related to insurance coverage and foreign direct investment (FDI), and the conceptual framework for developing forward-looking physical and transition risk indicators. Together with improvements in international statistical standards, such as the System of National Accounts and the Balance of Payments Manual, which will allow further climate-related breakdowns in a wide set of economic data, this is expected to increase the availability of data on these topics in the years ahead.

7.3 Making banks’ data reporting more efficient

The ECB’s strategy to reduce the reporting burden for banks is based on three pillars: (i) cooperating with other European and national authorities to integrate statistical, prudential and resolution reporting; (ii) incorporating existing statistical reporting into the Integrated Reporting Framework (IReF) as a first step towards broader integration; and (iii) collaboration with the banking industry to bridge the authorities’ data requirements and the language and definitions used by banks via the Banks’ Integrated Reporting Dictionary (BIRD).

The cooperation with other authorities picked up steam in 2024 with the establishment of the Joint Bank Reporting Committee (JBRC), in which the ECB, the European Banking Authority, the European Commission, the Single Resolution Board and relevant national authorities participate. In 2024 the JBRC set up a substructure called the Reporting Contact Group (RCG), which brings together experts on banks’ regulatory reporting from the banking industry. The RCG serves as a regular channel for cooperation and exchanges of views with authorities. The first priority of the JBRC is establishing common concepts and definitions to be used in new and existing reporting.

The aim of the IReF is to harmonise statistical reporting across euro area banks. In 2024 the ECB announced that reporting under the IReF was planned to start in late 2029. The new timeline reflects the feedback received from the banking industry on the need to ensure that the IReF is implemented smoothly.

In 2024 the BIRD collaboration, which includes authorities and the industry, integrated the first supervisory and statistical frameworks. The integrated data model, which specifies how data can be extracted from banks’ internal systems, and the rules on how to transform the data into the reports required by authorities were published on the BIRD website.

This section reports on policy-relevant research at the ECB and summarises the work conducted in 2024. It starts by reporting on the quality of ECB research, going on to describe the five main areas of research and policy advice, and the progress made during the year, including with research on the implications of artificial intelligence. The work of the Research Task Force on Heterogeneity in Macroeconomics and Finance is highlighted in Box 6.

ECB staff carried out extensive economic, monetary and financial research in 2024, providing important insights for policymaking, including for the ongoing monetary policy strategy review. Research drawing on the Consumer Expectations Survey and the Household Finance and Consumption Survey, for example, continued to provide highly relevant input into monetary policy.

The ECB strives to produce leading research in fields that are important for the work of central banks. Since December 2024 RePEc – a central index of economics research – has ranked the ECB first among institutions in the field of monetary economics, with the International Monetary Fund (IMF) in second place and the Board of Governors of the Federal Reserve System in third place. In the broader field of macroeconomics, the ECB has moved up one place compared with 2023, and is now ranked second behind the Harvard University Department of Economics and ahead of the IMF. In the field of banking, the ECB is now ranked first, moving up one place relative to 2023 ahead of the University of Chicago Booth School of Business and the Bank for International Settlements (BIS). Among central banks and similar institutions worldwide, the ECB is ranked second, behind the IMF and ahead of the Federal Reserve Board, the Federal Reserve Bank of New York and the BIS. In Europe, the ECB is ranked third across all fields and institutions, including universities (behind the London School of Economics and Political Science and Paris School of Economics).

Research projects undertaken during 2024 can be grouped into five broad thematic areas, all of which benefited from input from national central banks and collaboration within European System of Central Banks research clusters. First, in the area of design and implementation of monetary policy, research was conducted on the optimal design of monetary policy and the new operational framework, as well as other important topics such as market functioning, collateral and the impact of monetary policy on inflation dynamics. Substantial research efforts were devoted to deepening understanding of the evolving monetary policy transmission mechanisms, under the auspices of the Challenges for Monetary Policy Transmission in a Changing World (ChaMP) Research Network. Second, in the field of economic developments in the euro area, research projects provided analysis on firms, productivity and investment, household consumption and labour markets, prices and economic activity, while also developing new methods and techniques to improve forecasting. Third, in the area of analysis of the global economy, projects examined the international monetary system, global financial markets and trade, global spillovers, the international drivers of inflation and the outlook for global growth. Fourth, on the topic of Economic and Monetary Union (EMU) integration and governance, much of the research focused on the effects of fiscal policy on the macroeconomy, including the adoption of the Next Generation EU (NGEU) programme, the reform of the EU fiscal framework, and the interrelations between fiscal policy and inflation, as well as on monetary-fiscal interactions. Fifth, in the area financial stability, (macro)prudential policies and banking supervision, research efforts covered the resilience of banks and non-banks, the implications of monetary policy for financial markets and financial stability, and the design and assessment of prudential policies. Research in the area of banking supervision focused in particular on supervisory effectiveness and the impact of climate regulation on banks’ behaviour. Research on central bank digital currencies continued over 2024, focusing on the implications of a wide range of design features (e.g. remuneration, holding limits and privacy).

The rapid evolution of AI triggered significant research efforts at the ECB to improve understanding of the implications of AI for the economy and policymaking. An area that received particular attention in 2024 was the use of AI techniques for economic analysis, such as economic forecasting and the analysis of central bank communication. For the former, research explored the use of machine-learning techniques in inflation forecasting. Such techniques have the potential to consider specific economic dynamics and thereby improve forecasts in turbulent times. Other research used sentiment indicators derived from the textual analysis of news generated by large language models (LLMs) for the short-term forecasting of economic activity.^[85] As regards central bank communication, textual analysis generated by LLMs was used to explore how the ECB’s statements influence financial markets, particularly in times of economic uncertainty. This type of research provides insights into how sentiment extracted from central bank communication can contribute to a better understanding of market expectations for inflation and interest rates.^[86]

Research output at the ECB remained at a high level in 2024. In total, ECB staff published 124 papers in the ECB’s Working Paper Series and 12 articles in the Research Bulletin. Many of the working papers were also published externally in academic journals.

This chapter deals with the jurisdiction of the Court of Justice of the European Union (CJEU) concerning the ECB, provides information on ECB opinions and cases of non-compliance with the obligation to consult the ECB on draft legislation falling within its fields of competence. It also reports on the ECB’s monitoring of compliance with the prohibition of monetary financing and privileged access.

9.1 Jurisdiction of the Court of Justice of the European Union concerning the ECB

In June 2024 the General Court dismissed an action for damages brought by shareholders of Banca Carige (T-134/21, Malacalza Investimenti and Malacalza v ECB), requesting compensation for an alleged harm which they consider they had suffered as a result of actions undertaken by the ECB in the context of the exercise of its supervisory functions over the bank between 2014 and 2019. In this judgment, the General Court notably found that the exercise of supervisory powers by the ECB pursues a public interest in the proper functioning and stability of the markets. The extra-contractual liability of the ECB for acts and omissions related to the exercise of supervisory powers is therefore limited, since it would require a breach of a rule of law intended to confer rights on individuals. At the same time, the General Court recognised, in line with existing case law, that a breach of general principles of law – like the principle of good administration – can potentially give rise to extra-contractual liability. In this case, however, the General Court found that no breach occurred. This case represented the first opportunity for the CJEU to assess the merit of an action for damages for ECB supervisory action. An appeal is currently pending (C-557/24 P, Malacalza Investimenti and Malacalza v ECB).

In June 2024 the General Court dismissed seven actions brought by supervised banks^[87] seeking annulment of the deduction requirement and related reporting requirement imposed in relation to the irrevocable payment commitments given to the national deposit guarantee schemes and the Single Resolution Fund as part of their ex ante contributions. The ECB had imposed those measures within the Pillar 2 framework to cover the risk of overstatement of the bank’s capital position, which was triggered by the absence of consideration of the economic loss resulting from the transfer of the collateral securing the irrevocable payment commitments, which could no longer be used to cover losses on an ongoing basis. The ECB imposed those measures in accordance with a new methodology designed to take into account the judgments of the General Court from 2020 annulling decisions imposing the same measures owing to lack of an individual assessment of how the risk identified was managed and covered by the arrangements implemented by the banks and the capital and liquidity held by them. Those new ECB decisions were therefore adopted with an improved motivation aiming to better reflect the individual assessment performed. They were upheld by the General Court by the aforementioned seven judgments, confirming that the ECB correctly applied Article 16 of the SSM Regulation^[88] when assessing whether the banks were exposed to an insufficiently covered risk and imposing a measure to cover it. Four of the seven banks have appealed their individual judgments, and the appeals are currently pending at the CJEU.

In November 2024 the CJEU (Fifth Chamber) delivered its judgment in a preliminary ruling procedure submitted by the Federal Administrative Court of Germany (Joined Cases C-758/22 and C-759/22). In this case, the referring court sought to clarify whether several occupational mutual insurance institutions in Germany were pension funds within the meaning of Regulation (EU) No 2018/231 of the European Central Bank of 26 January 2018 on statistical reporting requirements for pension funds and therefore subject to the ECB’s statistical reporting requirements. The applicants argued that they were social security funds and, therefore, not subject to the ECB’s reporting requirements. The Court determined that the applicants could be classified as pension funds, as their activities fulfilled four criteria necessary to be classified in this sector. In summary, (i) their function was to offer benefits covering the risks of retirement, death and invalidity; (ii) they had management autonomy and kept a complete set of accounts; (iii) the vast majority of their members were required to join the mutual insurance institutions, which were, in principle, not entitled to provide their services to other persons; and (iv) the services were not guaranteed by the state and depended on the amount of the contributions paid and the success of the mutual insurance institutions in managing their assets. The case is important as it confirms that the ECB has the right to collect statistical information on the financial activities of the applicants as pension funds. As pension funds play an important role in the economy of the euro area, this information is needed to perform the tasks of the European System of Central Banks (ESCB), in particular concerning monetary policy.

9.2 ECB opinions and cases of non-compliance

Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union require that the ECB be consulted on any proposed EU or draft national legislation falling within its fields of competence. All ECB opinions are published on EUR-Lex.

In 2024 nine clear and important cases of non-compliance with the obligation to consult the ECB on draft legislation were recorded. Five non-compliance cases were in respect of Union legal acts and four in respect of national laws. The ECB adopted own initiative opinions in seven instances. In two instances, a non-compliance letter was issued.

The first EU case concerned an EU proposal for a Directive on alternative investment funds (AIFs). This case is considered clear and important because it concerns the ESCB’s access to detailed data on the AIF sector as well as the ECB’s statistical requirements regarding this sector. The second EU case concerned the Regulation establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA). This case is considered clear and important because it contains provisions regarding cooperation between the AMLA and the ECB. The third EU case concerned the Energy Performance of Buildings Directive. This case is considered clear and important because of the ECB’s need to access energy performance certificates. The fourth EU case concerned the Corporate Sustainability Due Diligence Directive. This case is considered clear and important because of its relevance for banks’ environmental, social and governance (ESG) risk management and the need to ensure coordination and information exchange between all authorities concerned.^[89] The fifth EU case concerned the Regulation on the transparency and integrity of ESG ratings. This case was considered clear and important because it concerns the Eurosystem’s independent assessment of its collateral requirements.

The first national non-compliance case concerns Bulgarian laws affecting Българска народна банка (Bulgarian National Bank). This case is considered clear and important because the temporary appointment of the Governor or Deputy Governors of the Bulgarian National Bank as caretaker prime minister raises important issues concerning the Bulgarian National Bank’s independence. The second case concerns a Greek law transferring the State’s remaining shareholdings in Greek banks to a different public body. This case is considered clear and important because the law has implications for Greek credit institutions subject to the direct supervision of the ECB. The third case concerns a Hungarian law bringing the Magyar Nemzeti Bank within the scope of the law on cybersecurity. This case is considered clear and important in view of its impact on the independence of the Magyar Nemzeti Bank. The fourth case concerns Maltese law affecting the remuneration of the Governor and Deputy Governors of the Central Bank of Malta. This case is considered clear and important in view of its impact on the independence of the Central Bank of Malta.

The ECB adopted four opinions on EU legislative proposals covering (i) payment and electronic money services, (ii) monetary agreements with third countries using the euro, (iii) reporting requirements in the fields of financial services and investment support, and (iv) the framework for financial data access.

The ECB adopted 38 opinions on draft national legislation. Opinions on national legislation often cover more than one subject. The ECB adopted:
- ten opinions concerning access to cash;
- six opinions concerning national central banks (NCBs);
- five opinions concerning matters related to the International Monetary Fund;
- four opinions concerning special-purpose bank taxes or financial transaction taxes;
- two opinions concerning cybersecurity;
- two opinions on international sanctions;
- one opinion concerning the introduction of the euro;
- one opinion concerning payment system oversight;
- one opinion concerning minimum reserve requirements;
- one opinion concerning crypto-assets;
- one opinion concerning assistance to borrowers;
- one opinion concerning central counterparty resolution;
- one opinion concerning the application of lobbying registration requirements to an NCB’s officials;
- one opinion concerning an NCB’s provision of emergency liquidity assistance;
- one opinion concerning the reporting of payment statistics;
- one opinion concerning a national financial stability council.

9.3 Compliance with the prohibition of monetary financing and privileged access

Pursuant to Article 271(d) of the Treaty on the Functioning of the European Union, the ECB is entrusted with the task of monitoring the compliance of the EU national central banks (NCBs) with the prohibitions laid down in Articles 123 and 124 of the Treaty and Council Regulations (EC) Nos 3603/93 and 3604/93. Article 123 prohibits the ECB and the NCBs from providing overdraft facilities or any other type of credit facility to governments and EU institutions or bodies, as well as from purchasing in the primary market debt instruments issued by these institutions. Article 124 prohibits any measure, not based on prudential considerations, which establishes privileged access by governments and EU institutions or bodies to financial institutions. In parallel with the Governing Council of the ECB, the European Commission monitors Member States’ compliance with the above provisions.

The ECB also monitors the EU NCBs’ secondary market purchases of debt instruments issued by the domestic public sector, the public sector of other Member States and EU institutions and bodies. According to the recitals of Council Regulation (EC) No 3603/93, the acquisition of public sector debt instruments in the secondary market must not be used to circumvent the objective of Article 123 of the Treaty.

The ECB’s monitoring exercise conducted for 2024 confirmed that Articles 123 and 124 of the Treaty were in general respected.

The ECB will continue monitoring the involvement of the Magyar Nemzeti Bank in the Budapest Stock Exchange as the purchase of the majority ownership of the Budapest Stock Exchange by the Magyar Nemzeti Bank in 2015 may still be seen as giving rise to monetary financing concerns.

The financing by NCBs of obligations falling upon the public sector vis-à-vis the International Monetary Fund (IMF) is not considered as monetary financing provided it results in foreign claims that have all characteristics of reserve assets. However, financial donations as provided in previous years by the Nationale Bank van België/Banque Nationale de Belgique and Banque de France via the IMF for debt relief for heavily indebted poor countries did not result in any foreign claims and therefore continue to require corrective measures.

The financing of the Spanish Financial Intelligence Unit (Servicio Ejecutivo de la Comisión de Prevención del Blanqueo de Capitales e Infracciones Monetarias – Sepblac) by the Banco de España is not compatible with the prohibition on monetary financing laid down in Article 123, as Sepblac is a public sector body. Consequently, the arrangements concerning Sepblac should be reconsidered with a view to ensuring compliance with the prohibition.

The ECB continued the open dialogue with its European and international counterparts in 2024. The interaction between the ECB and the European Parliament is at the heart of the ECB’s accountability framework. The ECB had regular hearings and correspondence with the Committee on Economic and Monetary Affairs of the European Parliament (ECON). Additionally, the ECB interacted with ECON as part of its ongoing work on a digital euro. In the international sphere, the ECB engaged with G20 partners, stressing the need to strengthen the resilience of both the banking sector and the non-bank financial sector and to advance the implementation of agreed G20 roadmaps and Basel III. The ECB also contributed to central bank-relevant policy discussions at the International Monetary Fund (IMF), including with regard to the IMF’s lending policies and facilities for emerging market economies and low-income countries.

10.1 The ECB’s accountability

The Treaty on the Functioning of the European Union (TFEU) grants the ECB independence to ensure that it can pursue its mandate of price stability free from political interference. This independence is matched by an obligation to remain accountable for its actions to the European Parliament, the body that represents the citizens of the European Union. The ECB’s accountability practices, based on Article 284(3) of the TFEU, allow for a two-way dialogue between the ECB and the European Parliament. This enables the ECB to explain its policies and decisions and to hear the concerns of citizens’ elected representatives. Moreover, judicial review by the Court of Justice of the European Union complements the ECB’s accountability framework.

In June 2024 EU citizens elected a new European Parliament, and the Parliament was in recess between the end of April and early July. As a result, the President of the ECB participated in three regular hearings before the ECON Committee – one in February with the outgoing Committee and two in the second half the year with the newly elected Members. The President also participated in the plenary debate on the ECB’s 2022 Annual Report. These activities facilitated the exchange of views on key monetary policy decisions and other central banking matters. The Vice-President also presented the ECB’s 2023 Annual Report to the ECON Committee in April. Moreover, the ECB published its feedback on the European Parliament’s resolution regarding the 2022 Annual Report in April.

Throughout the year the ECB responded to 12 written questions from Members of the European Parliament. These questions addressed topics including monetary policy, the economic outlook, the digital euro, and ECB institutional matters. After the election of the new Parliament, an introductory session on the ECB was held in September to familiarise parliamentary staff with the ECB’s activities and its accountability obligations. In November 2024 a delegation from the ECON Committee, which included several new Members of the European Parliament, took part in the annual visit to the ECB in Frankfurt am Main.

Over the course of 2024 the ECB continued its close collaboration with the European Parliament on the preparation phase of the digital euro. Executive Board member Piero Cipollone participated in two hearings before the ECON Committee to give updates on the progress of the digital euro project^[90]. Additionally, the ECON Chair and the Committee Members were kept informed via notifications of all major developments regarding the digital euro. The ECB also participated in events hosted by Members of the European Parliament to address various dimensions of the digital euro project.

The autumn 2024 Standard Eurobarometer survey revealed that 81% of respondents in the euro area support the single currency, marking a new all-time high. Additionally, 51% of euro area respondents expressed trust in the ECB, the highest level since autumn 2009 and an 8 percentage point increase compared with the same period in 2023. The ECB remains dedicated to engaging constructively with the European Parliament and citizens in the euro area. By explaining its decisions, addressing public concerns, and maintaining an open dialogue, the ECB aims to strengthen trust and ensure the effective discharge of its accountability obligations.

10.2 International relations

G20

During Brazil’s G20 Presidency in 2024, notwithstanding easing inflation pressures and global economic resilience, the global economy continued to face significant challenges owing to Russia’s war against Ukraine and escalating conflicts in the Middle East. Despite geopolitical tensions, the Brazilian Presidency successfully advanced multilateral cooperation, achieving agreement on communiqués at the July and October G20 meetings of finance ministers and central bank governors and on the Rio de Janeiro Leaders’ Declaration in November. The priorities focused on inequality, climate change, sustainable development, enhancing the role of multilateral development banks, financial stability and international tax cooperation. A G20 roadmap for better, bigger and more effective multilateral development banks was adopted. The ECB welcomed the Brazilian Presidency’s acknowledgement of the role of the Financial Stability Board (FSB) in banking sector and non-bank financial sector regulation, emphasising the need to implement (i) the G20 roadmap and FSB recommendations for crypto-assets; (ii) the G20 roadmap for cross-border payments; (iii) Basel III; and (iv) the FSB recommendations on non-bank financial intermediaries. The ECB also stressed the importance of regulating innovative technologies, such as artificial intelligence and tokenisation, to ensure their benefits are underpinned by robust regulatory frameworks.

Policy issues related to the IMF and the international financial architecture

The ECB continued to play an active role in discussions about the international monetary and financial system at the IMF^[91] and in other fora. In 2024 the IMF took significant steps to further assist emerging market economies and low-income countries.

In October the IMF welcomed a new 25th chair on its Executive Board. The new chair, together with two other chairs, represents Sub-Saharan Africa and strengthens the region’s voice and representation. The IMF also reformed its Charges and the Surcharge Policy to substantially reduce borrowing costs for member countries in need, while safeguarding its financial capacity. For low-income countries, the IMF set the course to put the Poverty Reduction and Growth Trust (PRGT) on a sustainable footing, in part by agreeing a package of multi-year policy reforms and funding to secure resources so as to permit continued IMF lending at concessional rates. Moreover, it undertook its first Interim Review of the Resilience and Sustainability Trust (RST). This trust helps low-income countries and vulnerable middle-income countries strengthen their macroeconomic resilience to climate change and future pandemics, thereby contributing to prospective balance of payments stability. EU Member States and their central banks are important contributors to both the PRGT and RST. Contributions from EU central banks can only be deployed if the resulting claim against the trust has reserve asset status, which precludes subsidy contributions in the form of grants or donations. The ECB also continued to support international initiatives to help vulnerable countries tackle rising debt vulnerabilities, in particular the improvement of the G20 Common Framework for Debt Treatments and the IMF-World Bank initiative to support countries faced with liquidity challenges but whose debt is sustainable.

Three years after the last general Special Drawing Rights (SDR) allocation by the IMF in 2021, the ECB and the Eurosystem national central banks reviewed their SDR Voluntary Trading Arrangements (VTAs) with the IMF.^[92] In November the ECB’s Governing Council concluded that the current Eurosystem VTAs remain adequate, including their trading ranges.

The ECB carries out important activities to address environmental, social, and governance (ESG) issues. As a public institution, the ECB is accountable to European Union (EU) citizens and their elected officials. This responsibility involves effective communication and engagement with diverse audiences, maintaining the highest ethical standards and transparency, empowering its employees while promoting their well-being, and assessing the impacts and risks associated with the climate and the environment. In 2024 several milestones set in the ECB’s climate and nature plan were achieved.

11.1 Updates on environmental, social and governance matters

This overview of key ESG developments in 2024 is complemented by other sections of this annual report and additional information available on the ECB’s website (Table 11.1).

Sections 11.2 and 11.3 detail how the ECB conducted major initiatives in 2024 to continuously enhance its governance frameworks as a European institution, while promoting transparency and engagement with citizens. Section 11.2 highlights how the ECB closely cooperates with peer institutions at the European and international levels to strengthen ethics, integrity and good conduct, thereby also responding to increased public interest in these matters. Section 11.3 outlines the initiatives implemented by the ECB to strengthen its outreach and to increase its transparency and accessibility to the public. Section 11.4 provides an overview on policies for staff and data on how the ECB fosters an open working culture and promotes career development, as well as updates on diversity and inclusion efforts, outlining key developments in 2024. Lastly, Section 11.5 covers the ECB’s work on climate-related and environmental topics and provides details on more specialised publications in this area.

ESG risks are assessed as part of the ECB’s risk management framework for financial and non-financial risks. This is described in the chapter on risk management in the ECB’s Annual Accounts 2024. One component of this framework is the climate stress test of the Eurosystem balance sheet^[93], whereby the ECB assesses the sensitivity of the Eurosystem’s financial risk profile to climate change. The first climate stress test was performed in 2022 and it has since become a regular exercise, with a new test being conducted in 2024.

11.2 Strengthening ethics and integrity

The ECB’s Compliance and Governance Office (CGO) is responsible for establishing ethical and governance rules in accordance with the highest standards of conduct, and for monitoring adherence to these rules.

In 2024, to support the national central banks and national competent authorities in the implementation of the Ethics Guidelines, the Ethics and Compliance Committee provided guidance on matters related to restrictions on private financial transactions and conflicts of interest regarding external activities and unpaid leave. In addition, to maximise the advantages and insights gained from having a diversity of perspectives, the Committee organised thematic sessions with external speakers, which were attended by participants from some 50 different public institutions and organisations. To mark Global Ethics Day, the Committee launched a banner with the text “Ethics: our common compass” in all official EU languages, highlighting the shared commitment.

At the European level, the ECB, together with other European institutions, worked towards the adoption of an interinstitutional agreement setting up the EU Ethics Body. The signing of the agreement is a major achievement and instrumental in fostering a common culture of good conduct among the European institutions. At the international level, the ECB was actively involved in sharing knowledge and best practices within the global Ethics Network of Multilateral Organizations (ENMO), both via its role as Vice-Chair of the network and via its contributions to meetings, working groups and the annual conference hosted by the World Health Organization, thereby strengthening global collaboration.

Maintaining awareness of ethics and integrity continued to be a top priority in 2024. In addition to programmes for newcomers, the CGO emphasised the organisation of training courses designed for and tailored to specific business functions, as well as refresher sessions on the rules applicable to private financial transactions. Several outreach initiatives were also organised to mark Global Ethics Day, including stands and a quiz for all ECB staff. The CGO continued its digitalisation efforts in order to simplify staff access to ethics advice, such as via ECB mobile devices. Moreover, the process for the submission of Declarations of Interests by high-level ECB officials was digitalised, allowing for faster and smoother submission.

The initiatives to raise awareness and constant efforts to develop intuitive digital tools led to a noticeable rise in the number of requests for ethics advice, from 2,767 in 2023 to 3,070 in 2024 (Chart 11.1). The annual compliance monitoring checks organised by the CGO in 2024 confirmed once again the overall adherence of ECB staff and high-level officials to the rules on private financial transactions.

The ECB’s independent Ethics Committee – together with the ECB’s Audit Committee – complements the ECB’s governance structure. It provides advice to high-level ECB officials on questions of ethics, mostly concerning private activities as well as employment upon leaving the ECB, and assesses their Declarations of Interests. In addition, the Committee monitors European and international developments in the field of ethics and good conduct. In 2024 it reviewed compliance with the rules on private financial transactions by high-level ECB officials via the Declarations of Interests and issued 34 opinions on a variety of subjects, such as ten opinions on post-employment restrictions (several of these opinions included recommendations on the observance of cooling-off periods). Ethics Committee opinions are published on the ECB’s website six months after the date on which they are issued.

11.3 Communication and transparency of ECB policy

As inflation came down further in 2024, and as it approaches the 2% target in 2025, the ECB’s policies have been helped by the stability of inflation expectations. Research increasingly shows that expectations of consumers and businesses matter at least as much as those of financial markets for the transmission of monetary policy. To successfully steer expectations, the ECB must communicate in a clear, consistent and understandable manner.

2024 was marked by a turn in the policy interest rate cycle. The first interest rate cut in June 2024 was accompanied by a coordinated communication effort to explain the decision and the outlook for the economy. This included opinion pieces by the President that appeared in several media outlets across Europe (and were also published as an ECB Blog post on the reasons for the rate cut), as well as TV and radio interviews by members of the Executive Board. An Explainer that focused on what the rate cuts mean for people in their everyday lives was made available in all EU languages and publicised via the ECB’s social media channels.

Enhancing outreach

Rising prices had become a very prominent issue for the people of Europe during the past inflation surge, raising many questions and concerns. The ECB continued to explain its actions to the public. Research shows that most Europeans still hear about the ECB on TV and radio – with an increasing share of people also reached via online news. ECB policymakers therefore focused on TV, social media and general interest media as channels for explaining ECB policy and how it delivers price stability to the benefit of all.

New formats were explored, such as a “behind the scenes” TV documentary on how decisions are made, giving personal insights into how the ECB operates. To establish a direct connection with people across the countries of the euro area, ECB policymakers often combined official visits with opportunities to interact with citizens in places such as a local farmers market, or in schools and universities. An extraordinary effort was made to reach people who may not usually hear about central bank policy, through an appearance by President Lagarde on a well-known TV comedy show to explain in a simple and accessible manner what the ECB does to keep prices under control, how artificial intelligence affects the economy and how to cope with greater economic uncertainty.

To make the link between monetary policy and real economic activity tangible, ECB policymakers visited companies in different countries of the euro area – for instance, the quantum computing laboratory, Pasqal, in France, the technology and services supplier, Bosch, in Germany, and the Port of Rotterdam in the Netherlands. These visits are not only occasions on which to discuss how ECB policy is affecting the economy and businesses. They also help policymakers to better understand the economic challenges facing companies – for example, the impact of regulation and technology on productivity, the difficulty of finding well-trained workers, or the demands of the green transition.

The ECB continued its efforts to be a good institutional citizen of the City of Frankfurt am Main and engage directly with local people. In 2024 the ECB once again opened its doors to visitors during the annual “Night of the Museums” festival. It also participated in the local Europafest celebrations on Europe Day (9 May), with a much-visited stand, and together with the Frankfurt Radio Symphony it organised a highly successful Europa OpenAir concert near the ECB’s premises that was attended by around 17,000 guests.

Making the ECB more accessible

Throughout the year the ECB’s Visitor Centre hosted a total of 21,325 visitors, with 12,798 participating in guided tours and 8,527 attending lectures. In view of the public’s keen interest in the architecture of the ECB’s Main Building, guided architectural tours were relaunched in July 2024 which were attended by 1,040 visitors. This is only a fraction of those who are interested, but the number of places on tours is limited owing to capacity constraints.

To facilitate access to the ECB and its policies – including online access – the ECB revamped the structure of its websites, adopting a user-centric approach, to make it easier for users to search for information. In addition, a new WhatsApp channel was set up to reach new audiences. It offers news, quizzes and other interactive content and had reached over 90,000 subscribers by the end of 2024. The ECB also continued its efforts to use technology to ensure that the information it publishes is easy to understand. To this end, an artificial intelligence-based tool is being developed that enhances writing style, and more multilingual content is being provided with the help of eTranslation, the European Commission’s machine translation service.

Special days and anniversaries offer opportunities to draw public attention to the ECB and its work, to explain what it does and how its work affects people. 2024 was the tenth anniversary of the establishment of European banking supervision. To mark the occasion, exhibits on banking supervision in the ECB Visitor Centre were updated and enhanced. In the past year the ECB Podcast also celebrated its fifth anniversary, which was marked with a special #AskECB podcast episode in which questions from citizens were answered. And the ECB’s LinkedIn channel reached 500,000 followers.

The ECB’s public access regime plays a crucial role in its transparency policy. The regime fosters openness and strengthens the ECB’s democratic legitimacy by granting the widest possible access to ECB documents, while ensuring the protection of the ECB’s independence and effective functioning.

The number of requests for public access to ECB documents slightly increased in 2024 (74 requests) compared with 2023 (73 requests). Requests continued to cover a broad spectrum of topics related to institutional and governance aspects, and central banking and supervisory matters. As in 2023, the highest number of requests were for documents related to institutional matters such as procurement. Underlining the ECB’s commitment to transparency, documents released in response to requests for public access are typically made available via the ECB’s Public Register of Documents. Moreover, the overview of the topics covered in requests for access to documents received by the ECB was updated for 2024.

To increase awareness of the legal framework governing access to documents and to foster a culture of transparency within the institution, the ECB organised outreach initiatives aimed at all ECB staff on the International Day for Universal Access to Information proclaimed by UNESCO.

No findings of maladministration were raised by the European Ombudsman regarding the ECB’s handling of public access requests.

11.4 Empowering our people to excel for Europe

In 2024 the ECB continued to prioritise efforts to foster an open working culture and a dynamic, inclusive and supportive workplace where every employee is empowered to excel. It introduced several initiatives to enhance well-being, career development, and diversity and inclusion (D&I). The ECB also started the transition to dynamic workspaces, a new design of our office spaces that reflects the evolving landscape of hybrid remote and office work. New policies, such as fully paid special parental leave and increased leave for carers, underscore the ECB’s dedication to fostering an equitable environment. A Career Portal was launched to support staff development, offering opportunities for mobility (whereby staff can change jobs internally) and mentoring. The focus on D&I is evident through ambitious gender targets and initiatives that address its different facets. Through these efforts, the ECB aims to cultivate a workplace where all employees feel valued and empowered to contribute their best to Europe’s future.

Working culture and conditions

The ECB is transforming its workspaces to adapt to a hybrid model of remote and office work. In 2024 it took the first steps towards introducing dynamic workspaces, including desk-sharing, in order to foster flexibility, inclusion and collaboration, while optimising the use of office space. Employee involvement is vital to create a working environment that supports the diversity of individuals and ways of working. Some teams have already designed their new spaces and will move into them in 2025.

The ECB is introducing a special leave policy from 1 January 2025 for parents of children born or adopted from this date. They will be able to take 40 days of additional paid leave during the first three years following birth or adoption. A transitional measure grants 20 days for children born or adopted from August 2022. Special leave granted to carers has been increased to ten days per year. These additions to existing benefits underscore the ECB’s commitment to work-life balance and gender equality and foster an inclusive workplace.

The ECB continued to prioritise listening to staff to better understand their needs. Guided by survey feedback, the ECB introduced initiatives to enhance well-being and strengthen the culture of speaking up about issues. For example, focus groups helped to understand root causes and identify solutions for well-being challenges, communication campaigns raised awareness of flexible working options, and workshops equipped staff and managers to address disrespectful behaviours.

Furthermore, a cross-business area review of the framework for handling workplace misconduct was carried out, aiming to make procedures clearer and more efficient, and to ensure better protection and support.

The review of the General Salary Adjustment (GSA) methodology was concluded in 2024. This methodology defines how ECB salaries are adjusted on a yearly basis. The new approach is based on data published by Eurostat, guaranteeing transparency and objectivity.

Talent and career development

Career development is a priority at the ECB, and 2024 saw the launch of a key initiative, the new Career Portal. This functions as a central point for staff to explore opportunities such as mobility and mentoring. The Career Portal also offers a new option that enables staff to look for people within the organisation to swap jobs with, so they can make horizontal moves, expand their skills and enhance their professional networks. In 2025 new features, such as the chance to experience a colleague’s working life through job shadowing, will be added to the Career Portal. In the first six weeks after the launch, 1,207 staff members used the Career Portal.

Regarding mobility, under the sixth edition of the Schuman Programme, launched in 2024, 39 projects were offered as secondment opportunities, allowing staff exchanges between the ECB, national competent authorities (NCAs) and national central banks (NCBs). ECB staff also continued to take part in exchanges with several NCAs and European institutions, as part of a dedicated swap programme for the Single Supervisory Mechanism (SSM). At the end of 2024 seven swap arrangements were in place with four NCAs (the Banca d’Italia, De Nederlandsche Bank, Banco de España and ACPR) and three agencies (the Single Resolution Board, the European Investment Bank and the European Securities and Markets Authority).

Our working environment is changing and presenting us with new challenges at an increasing speed. Developing skills and acquiring new ones is crucial for both personal growth and organisational success. The 2024 learning programme focused on artificial intelligence (AI), climate risks and leadership. In the area of AI, it focused on raising awareness and fostering interest: employees were encouraged to explore what AI is and to begin experimenting with technologies and tools. A climate risks learning programme enabled employees within the European System of Central Banks (ESCB) and the SSM to understand the impact on the financial system. Leadership development initiatives included a 360-degree feedback exercise for all leadership levels and, for the first time, a dedicated development programme for team leads.

Diversity and inclusion

At the ECB, nurturing a culture of diversity, inclusion and belonging involves collective efforts. Our Executive D&I Sponsors provide leadership support and lend weight to the topic, while D&I Ambassadors promote D&I within the business areas, alongside six D&I networks that amplify the voices of underrepresented groups. By embedding a D&I lens in policy design and enabling an open dialogue at the bank, the D&I Adviser and HR team unite these efforts. To harness our collective D&I experience and knowledge, an ESCB and SSM D&I network meets regularly, bringing our institutions a step closer to mirroring and delivering ever better results for the citizens the ECB serves.

In pursuit of gender equality, the ECB has introduced ambitious gender targets and accompanying actions. In 2024 women accounted for 33.3% of staff at management level (I-L salary bands) and 37.3% at senior management level (K-L salary bands), which fell 0.7 percentage points short of the management and senior management targets. Looking at the composition of management, significant progress has been achieved over the past ten years. Nevertheless, closing the gap at expert level (F/G-G salary bands) and at team lead level (H salary band) remains a challenge (Figure 11.1), underlining the need to keep gender balance high on our strategic agenda.

In 2024 efforts extended beyond supporting women to include engaging men through a dedicated series of talks on gender norms, masculinities and paternity leave. In the aim of cultivating and sustaining an environment in which all individual backgrounds, experiences and abilities are valued, several workshops were held focusing on inclusive behaviour and leadership, LGBT+ inclusion, race, ethnicity and allyship.

The ECB dedicated the 2024 EU Diversity Month to race and ethnicity, partnering with external experts and piloting a mentoring programme and focus groups for ethno-racial minority staff. Insights collected about strengths and areas for improvement formed the basis for a pilot racial inclusion workshop for managers.

11.5 Advancing work on environmental and climate-related challenges

Recent advances in climate economics and modelling show that the costs of unabated climate change are significantly higher than had been assumed. This is partly due to insufficient progress in mitigating climate change. A timely transition to a greener economy would be significantly less costly.^[94] Annual global carbon emissions are now at an all-time high and scientists expect global warming to reach 2.6-2.8°C above pre-industrial levels this century, even if current policy commitments are met. This is much higher than the limit of 1.5°C set under the Paris Agreement.^[95] The risks of a hotter planet and too late a transition are therefore increasing. In addition, nature degradation affects the economy and leads to financial risks. Climate and nature are interlinked, and the ECB needs to understand their combined impact on the economy and on the financial sector to effectively deliver on its mandate.

In 2024 the ECB continued to work on its climate and nature plan for 2024-25. This work is coordinated by the ECB’s climate change centre and conducted in collaboration with internal stakeholders and the relevant Eurosystem committees and climate fora. The plan builds on past achievements and outlines the ECB’s vision for how to address the impact of climate change and nature degradation within its mandate. Besides the continued implementation of the measures that had been agreed in the past^[96], it identifies three focus areas for further work: (i) navigating the transition to a green economy, (ii) understanding the increased physical impact of climate change, and (iii) advancing work on nature-related risks. The climate change centre has also developed capacity-building initiatives and enhanced synergies within the Eurosystem, through common training programmes, joint seminars and projects. ECB staff have also contributed to training courses and workshops with central banking peers and other stakeholders outside the Eurosystem. The ECB has contributed to advancing the climate agenda in international fora, including the Central Banks and Supervisors Network for Greening the Financial System (NGFS), the Financial Stability Board, the Basel Committee on Banking Supervision, the European Supervisory Authorities and the European Systemic Risk Board, the Bank for International Settlements (BIS), the BIS Committee on Payments and Market Infrastructure, the G7, the G20, and the International Monetary Fund and World Bank.

In monetary policy implementation, the climate-related financial disclosures of the Eurosystem’s monetary policy holdings and the ECB’s foreign reserves, published in June 2024, expanded the scope of the report from corporate assets to include other asset classes. The report now covers 99.7% of the total assets held for monetary policy purposes. The carbon emissions associated with corporate assets – for which the Eurosystem targets a decarbonisation path that supports the goals of the Paris Agreement and the EU’s climate neutrality objectives – continued to decrease. Since corporate bond reinvestments were discontinued as of 31 December 2024, this reduction will be based on the maturity profile of these assets and on actions by the firms themselves. In May 2024 the Governing Council agreed that interim emission reduction targets will be set for the corporate asset holdings, at this stage to internally monitor the corporate portfolios’ emission reduction trajectory. If deviations from the desired trajectory are identified, the Governing Council will assess the need for remedial actions, within its mandate, on a case-by-case basis. In addition, the Eurosystem continued to further incorporate climate change considerations into its monetary policy operations and enhance its risk assessment and management. For example, the Eurosystem NCBs now apply the common minimum standards for their in-house credit assessment systems (ICASs), in line with the commitment made in July 2022.^[97]

Regarding financial stability and scenario analyses, the one-off Fit-for-55 climate scenario analysis by the ECB, the European Systemic Risk Board and the European Supervisory Authorities shows that transition risk losses alone are unlikely to threaten overall EU financial stability. However, when these risks are combined with macroeconomic shocks, they can increase losses for financial institutions. This calls for a coordinated policy approach. The new long-term climate scenarios produced by the ECB-led NGFS workstream include an updated damage function, leading to a more adverse assessment of physical risk, and highlight how insufficiently ambitious climate policies make the transition more difficult.

ECB Banking Supervision continued to assess banks’ alignment with ECB supervisory expectations on climate-related and environmental risks. Frameworks for climate and nature-related risks are now broadly in place for most banks. However, for a small number of banks, foundational elements for the adequate management of climate and nature-related risks are not yet in place. If banks do not meet the requirements by the set deadlines, they may face periodic penalty payments.

Concerning the contribution to climate-related data, all three sets of ECB statistical indicators on climate (namely for sustainable finance, physical risks and carbon emissions) were updated and improved in 2024 (see Section 7.2)

The annual climate-related financial disclosures of the ECB’s non-monetary policy portfolios and its environmental statement give an overview of the carbon footprint of the ECB’s financed emissions and the reduction targets, as well as the environmental impacts and objectives of the ECB’s own operations. Data on the ECB’s environmental performance in 2024 will be published in 2025, together with a new Environmental Management Programme for 2025-27.

Work on reducing the environmental footprint of euro banknotes continued in 2024. Actions taken included steps towards achieving the move to 100% organic cotton for paper substrate by 2027, and research on extending the lifespan of banknotes in circulation and on alternative sustainable waste disposal methods, such as recycling and reusing waste material. Finally, future euro banknotes are being developed in line with eco-design principles. This means that environmental aspects are considered at all stages of the banknote development process (see Section 6.3). Regarding electronic retail payments and in its role as a catalyst, the ECB, together with the ESCB, investigated ways to facilitate a reduction in the environmental footprint of the payment process. The Eurosystem has developed initial environmental best practices for electronic retail payments, focusing exclusively on digital payments. The same approach is being applied to the digital euro project, where the Eurosystem is focused on minimising the environmental footprint across the entire value chain. This involves using existing standards and optimising processes, applying protocols to minimise energy consumption and adhering to best practices for environmental performance and data transparency.

In addition to implementing the measures that had been agreed in the past, the ECB increased its work in three areas (Figure 11.2).

The ECB made progress in understanding and addressing the impact of the transition to a greener economy. The July 2024 round of the ECB’s bank lending survey showed that climate risks are increasingly taken into consideration in lending conditions and in loan demand, particularly for financing investment for the green transition. An analysis showed that there is still a need for considerable green investment in Europe, despite progress. An ESCB report analysed the structural consequences of the transition for productivity, while analytical contributions such as a box in the Economic Bulletin on the macroeconomic effects of climate change transition policies enhanced the ECB’s macro-modelling framework. An ECB Blog post showed that energy-intensive firms suffer from low profit margins and discussed the implications for the green transition. Regarding monetary policy implementation, the Governing Council confirmed in March 2024 that, to the extent that different configurations of the operational framework are equally conducive to ensuring the effective implementation of the monetary policy stance, the design of the Eurosystem’s future operational framework should facilitate the pursuit of the ECB’s secondary objective – in particular the transition to a green economy – without prejudice to its primary objective of price stability.

As regards the increased physical impact of climate change, the ECB explored how to integrate this impact into climate scenarios and macroeconomic projections. Contributions included exploring the effects of temperature shocks on inflation in euro area countries and the amplification of physical risks through supply chain linkages. Regarding adaption to climate change, a paper on policies to reduce the climate insurance protection gap, published by the ECB and the European Insurance and Occupational Pensions Authority, elaborated on the supply and demand-side causes of the gap in Europe and outlined possible steps towards a European system for natural catastrophe insurance protection.

Advancing work on nature-related risks, the ECB published a box on “ecosystem services” and an article on the impact of nature degradation and biodiversity loss in the Economic Bulletin, which concluded that nature degradation can pose significant challenges to the ESCB’s Treaty-based objective of maintaining price stability and its task of contributing to financial stability. Additionally, the ECB, together with the Potsdam Institute for Climate Impact Research, NatureFinance and the University of Minnesota, conducted research that highlighted the importance of integrated nature-climate scenarios for a more accurate view of the risks to financial and economic stability. The ECB also carried out research that explored the legal implications of nature-related risks for central banks and supervisors, as outlined in a speech by Frank Elderson on the risks posed by nature degradation.

Many of the achievements in 2024 were made possible through collaboration among colleagues across the ECB and the European System of Central Banks (ESCB). In particular, the Governing Council and the General Council were supported in their decision-making processes by a range of expert committees. These committees, which comprise experts from the ECB and the ESCB, give advice in their respective areas of competence. In this Chapter, some of our colleagues explain the role of the committee they participate in. They also give an impression of their personal experiences working on the committee and more generally at the ECB.

Oscar Arce

I have the privilege of chairing the Monetary Policy Committee, a key forum where experts from across the Eurosystem and the ESCB come together to support the Governing Council and the General Council. Our work focuses on analysing economic developments and preparing policy discussions that help guide decisions on interest rates and other monetary policy measures. Simply put, we help ensure that our policies keep inflation stable and support the euro area economy.

Before joining the ECB, I was Director General for Economics, Statistics and Research at the Banco de España, where I worked on economic analysis and forecasting. I also spent time at the Spanish Securities Market Commission and the Spanish Prime Minister’s Economic Bureau. I hold a PhD in Economics from the London School of Economics and Political Science, with research focusing on monetary policy, financial stability and macroeconomic policy.

Leading the ECB’s Directorate General Economics is both an honour and a great professional challenge. The ECB has been a pillar of stability and prosperity for the European Economic and Monetary Union since its inception. Our role, in close collaboration with the rest of the Eurosystem, will remain crucial in the years ahead. What I enjoy most about my work is the constant exchange of ideas with talented colleagues across Europe.

Outside of work, I enjoy spending time with my family in Madrid and exploring the open road on my motorbike.

Cornelia Holthausen

I serve as Chair of the Financial Stability Committee, which is a forum where we discuss matters related to identifying and assessing financial stability risks and the appropriate stance of macroprudential policies.

After my PhD I was very motivated to work for Europe and joined the ECB in 1999 as an economist in the Directorate General Research, with a focus on money markets and payment systems. I quickly became interested in hands-on policy work and was happy to join the Directorate General Market Operations a few years later as a liquidity manager. It was a fascinating place to be during the financial crisis. Analysis and fast decision-making went hand in hand, and I felt that the work of all team members really made an impact.

Later I took a managerial path in the areas of financial research, market operations, economics and, finally, financial stability. It was a great experience to move around the ECB and work on so many different topics with different teams over the years. I encountered a very strong commitment to delivering high-quality output across the institution.

In the Directorate General Macroprudential Policy and Financial Stability, we focus on providing comprehensive analysis and policy advice related to macroprudential policies, financial stability and financial regulation. Our team is dedicated to identifying and monitoring systemic risks in the financial sector across the euro area. In doing so, we work closely with the national central banks, the Single Supervisory Mechanism, the European Systemic Risk Board and other ECB business areas. Our work is challenging but it is also rewarding to all come together for a common purpose.

I am happy and proud that I have been able to work for so long at an institution that is integral to Europe and has been strong even through difficult periods. And I know that Europe will remain firmly united in the decades to come.

Vitaliana Rondonotti

Since 2017 I have been the rapporteur of the Statistics Committee. I coordinate cross-cutting ESCB statistical matters, monitor the implementation of the statistics work programme for the ESCB and the Single Supervisory Mechanism and support the Chair in the strategic steering of the committee. As rapporteur, I have experienced challenging but enriching times. I have served directly under four Directors General in the Directorate General Statistics and witnessed substantial transformations of the statistical function owing to ever-increasing data needs, new methodologies, the rapid evolution of technology and the need to collaborate efficiently with an increasing number of stakeholders in person and virtually.

Having lived and studied in different countries, I grew up appreciating multinational and multicultural environments and as a strong supporter of international cooperation. When I heard about the project of a single European currency, I was thrilled by the opportunity to join an international institution like the ECB and work for Europe.

Following my studies in methodological statistics, I joined the ECB’s Directorate General Statistics in 2000 as an expert in seasonal adjustment. At first I was involved in the production of monetary aggregate statistics, but quite soon I became very interested in contributing to new statistical initiatives, such as exploring the use of central credit registers and other new data sources for statistical purposes and the establishment of the securities holdings statistics database, one of the first ESCB projects on granular statistical information.

I take pride in serving the Statistics Committee, contributing to the production of the high-quality European statistics that are critical for ECB policymaking, and doing my part for a better and stronger Europe.

Sylvia Hildebrandt

I am a Senior Office Coordinator in the Directorate Banknotes. Since joining the ECB in 2017 I have been responsible for managing the administrative and logistical arrangements for the Banknote Committee. The task of this committee is to ensure that euro cash remains widely available, accessible and accepted as both a means of payment and a store of value, as well as remaining innovative, secure and environmentally friendly.

My role involves facilitating seamless exchanges between the Chair, Secretary and committee members, and I truly value the collaborative atmosphere and team spirit that crosses national borders.

Before my time at the ECB, I worked in the private sector in talent management and then as a Team Assistant. I have always been passionate about working with people and organising events, and I was thrilled to bring my expertise and skills to my role at the ECB. I thrive in the ECB’s diverse and international environment and, having studied Anglistics, I love putting my language skills into practice every day. I am deeply committed to supporting a strong Europe and I take pride in contributing to this goal through my work with the Banknote Committee.

Outside of work, I enjoy spending time outdoors, whether with my dog or on my mountain bike. My partner and I love cycling through the beautiful landscapes of our home in the Odenwald.

I am excited to continue contributing to the ECB’s mission and I look forward to the opportunities that the future holds.

Christian Barontini

I serve as Secretary of a group that brings together the Secretaries of all the ESCB committees. This involves providing technical, logistical and strategic support. We advise on the rules governing committees, ensure alignment in the content and timing of common deliverables and monitor how committees respond to requests from the decision-making bodies.

My first experience with the committees came early in my central banking career when the euro was introduced in 1999. I participated in a task force of the Monetary Policy Committee as a representative of the Banque de France. This helped deepen my understanding of the mechanics behind European projects and the importance of engaging with national perspectives to find common ground.

I joined the ECB in 2007 as an economist in the Directorate General International and European Relations, where I supported the preparation of ECB policy positions for EU institution meetings and fora in Brussels. I later moved to my current job in the Directorate General Secretariat, where I coordinate the meetings of the ECB’s decision-making bodies. Throughout this period, I have also been an active member of the Communications Committee, which advises the decision-making bodies on the full range of internal and external communication issues, such as how to adapt to the evolving use of digital tools, or communication aspects of major projects such as the 2021 monetary policy strategy review.

The euro is a unique currency that was created to promote growth, stability and economic integration in Europe. Contributing even in a modest way to such an important mission is a source of great pride for me.

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