Moreover, the extra exposure to any single country that the Eurosystem might acquire as a consequence of OMT activation would be secured by the country’s strict obligations arising from the European Stability Mechanism (ESM) macroeconomic adjustment programme to which the country would have to submit as a precondition. It is worth noting that in June 2015 the European Court of Justice ruled that, given the strict modalities for activation, OMTs fall within the scope of the ECB’s mandate and include sufficient safeguards to avoid monetary financing. A number of safeguards apply to public sector bond purchases under the PSPP too. Such purchases have a monetary policy purpose which is different from the one that applies to OMTs and are specifically aimed at bringing inflation back to our medium-term objective in a situation in which our key interest rates are at levels that can hardly be reduced much further. The modalities are exclusively governed by the primary objective of price stability and are decided in full independence, irrespective of developments in other policy areas. The size and duration of the PSPP are calculated to achieve progress towards the ECB’s inflation objective. The effectiveness of the tool is rooted in two important features of the financial system. First, government bond yields are the benchmark indicator for pricing a large set of private debt instruments. Second, government bond markets are deep and liquid. Interventions in these markets can initiate a process of portfolio rebalancing with significant secondary effects on broad financing conditions.

Several safeguards are in place to minimise potential distortive effects on market functioning and price formation (such as the issuer limit and the issue share limit of 33%). There has been a prominent financial stability dimension in all unconventional measures taken, but the existing institutional framework ensures that monetary policy is the last line of defence with respect to preserving financial stability. The establishment of the European banking union, in particular the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM), has taken monetary policy one step further away from financial stability issues. Progress has been made to ensure that regulatory capture and forbearance are minimised and that shareholders bear responsibility and face the consequences of failure. But we are not there yet. These mechanisms need to be complemented by a common system of deposit protection, which would further bolster financial stability by reducing the risk of bank runs in crisis times. Conclusion To conclude, unconventional policies have been complicated to implement and to communicate. But they have been effective in enhancing our ability to deliver on our mandate in a medium-term perspective. Our measures have been designed to complement each other and have proved adaptable to and effective against the series of shocks which have buffeted the euro area economy. The complex nature of unconventional measures has repercussions for the transparency and accountability dimension of central bank independence. But they were a sine qua non for our mandate to be respected.