aro Op Presiers ‘Me Michael MeGeath TO DAilEreann [Lenster House ‘Dubin ‘Repub of eta Franktut am Main, 18 Deziiber 2014 Re: Your letter dated 19 September 2014 Dear he Metab, “Tank you fr you ler, Belore outing some of he ECB's considerations, lot me fet stress that the Cena Bank of Ireland and ts govema, Me Honohan, shoud be the primary interact fr Member of Oil Erean whan comes tothe monetary palcy conducted bythe Eurosyster, just ‘8 the President of the ECB isthe primary inleocutor for Members ofthe European Fariament on these mater. ‘This nowitstandng, kt me provide you wih some comments in response tothe cancems you ‘expressed about he inerest ate constlaion in ketnd, a pareuar egarcig loans to households! ‘and sma and medium-sized enterprises (SMES) Lending interest rates may difer across bank fr mary easons, incuing rskpremia the state of the business cycle andthe stuation proving nthe respective banking syst. Wile the ECB has no direct impact on sich factors, enurng 8 smeather functoning of manetiry urien should affect ‘tem ina postive manrer. |As regards the fle of the ECB, ts Governing Counc ~ in pursuing its prce stabity mendate — besides reductions in he main polcy rates decided on a combination of monetary policy measures at ts June and September 2014 moetngs wt a vew to enhancing the functioning of the monetary "Pls te tthe ish you fe fnew moras ling in land 3.15% ste sestm morgage [Cnn a ovoog oy ee fed we ast es hn oe eons wh uae ‘Sows a Anjou fm or ssa ashe, whch pale vile he oer mong ar {end (ky MIRACLE RAGE RA SISOCUR) waren ae 201 whee te gem mane ‘em cand (sky MIR MLE BAZCK RA 2290 CURN) was 4376 he sete Te umber ‘set thenponente rte 4S manne ou Tels sacnipaasuslton dDATASET-fa-CAREE_AREACIIDACTMIADS ITEM=AICASD ‘Paeadesings Address Eps Conral Bank ESrpaan Cantal Sank els saase 1 ‘Sonemannstiase0 000 Freitot sm an Foe S800 tte 05 oste rank ami, Seman mat ees presdenecs europa 0spokey tranemision mechenism by supporting lending fo the real economy These measures inc de targeted longerterm refnancing operations (TLTROS), ouight purchases in the asset-becies securities markt (the ABS purchase programme) and a new covered bond purchase programme (CPPS). Restoring a funetoning ransmison mechanism, notably for bank endings strumextal in ensuing that the monetary poey stu that hasbeen introduced reaches the Fra borrowers ‘an, thereby, supports real incomes, spending and price formation. As a package, these measures bong tothe tration of unconventional monetary polices known as cre easing, Nevertheless, shoud be keptin mind thatthe ECB's scons are solely motvated by the need o atan monetary poly objectves. The ECB does not tere wih the normal acy of commercial banks in pring leans. ‘ther factors wa also hep reduce nancial fragmentation, suchas the set-up of he Banking unt. We alto expect the station to improve futher folowing the successful completion of the comprehensive assessment which hs the potential o reduce the fapmectaton nthe bank fencing ‘channel over the medium term as markt perceponsreparcing euro area banks improve andthe price discovery mechanism functons ecient throughout tne fnancial system, Final, the crisis hes painfuly revealed he economic hardship citizens have fo face when sucha! ‘gies have not been resolved in @tmaly and foresul manner. Removing these rigidities snot merely ina county's own intra, but loin the interests of he monetary union as. a whole Movs Lk