was innovative. not surprisingly, it triggered many discussions as well as criticism. the latter focused on the reference value and the co - existence of two distinct pillars. the first pillar and the use of the reference value much of the criticism owes to an overly simplistic understanding of the first pillar as a simple comparison between observed monetary growth and the reference value. contrary to much journalistic discussion, however, m3 growth away from the reference value over shorter periods may not be interpreted as a policy failure. in fact, the relationship between interest rates and monetary growth is complex, it may vary over time and it is shock specific. most importantly, monetary policy actions are not geared to returning m3 growth to the reference value as quickly as possible, but to achieving the objective of price stability over the medium term. it seems that m3 has been more sensitive to short - term developments in financial markets than one may have expected. as a consequence, monthly changes in m3 growth became quite volatile and measures of short - term trends in monetary aggregates have to be interpreted with caution. most importantly, in order to overcome the limited signalling properties of money in the short - run, the scope of monetary analysis has been enriched over time and goes well beyond the narrow study of deviations between the growth rate of m3 and its reference value. the monetary analysis undertaken by the eurosystem consists of a comprehensive assessment of the liquidity situation based on information from a large number of sources, ranging from monetary and banking statistics to balance of payments and financial accounts. it involves a thorough analysis of components of monetary aggregates ( in particular m3 and m1 ) as well as their counterpartsfrom both mfi liabilities and mfi assets ( in particular loans to the private sector ). various money gap measures, concepts of excess liquidity and monetary models are used to identify the factors underlying the developments in money and credit and to best extract the information contained in money for longer term price developments. monetary analysis and the reference value : main conclusions the governing council acknowledged the need to communicate more convincingly the enriched scope of monetary analysis and stressed the rich choice of data and methods used. to underscore the longer - term nature of the reference value as a benchmark for assessing monetary developments, the governing council decided to no longer conduct a review of the reference value on an annual basis. importantly, the reference value for m3 is based on medium - term assumptions for real gdp growth and velocity. the mere announcement of the annual review, however, unint

at international level can be improved through a clear assignment of representatives. part ii how the bcl envisions and implements liquidity surveillance the 2008 bcl mandate to monitor the liquidity of markets and market operators recognizes central banks ’ unique role in the surveillance of systemic liquidity risk. the crisis demonstrated that liquidity risk can emerge quickly. the manner in which liquidity risk materializes and is transmitted is determined by the nature of funding instruments and linkages among financial institutions, the degree of leverage of market operators, as well as their reactions to emerging stresses. policy responses to the crisis must, at a minimum, enhance institutions ’ liquidity risk management and information available to measure and track systemic liquidity risk. the task is complicated because the assessment of liquidity risk at the systemic level is often susceptible of a fallacy of composition given that the viability of banks ’ individual approaches to liquidity risk will depend upon the strategies being pursued by other market operators. for instance, if banks have a great deal of interconnectedness via the interbank market, a liquidity shock impact will be relatively larger than if their interconnectedness was lower. in addition, if banks ’ business models were diverse, the impact of a liquidity shock would be relatively smaller than if banks ’ activities were concentrated on just one business line. the 2008 law, in giving to the bcl the mandate to monitor markets and market operators ’ liquidity, acknowledged the necessity of liquidity surveillance in luxembourg. on this capacity, the bcl has issued regulations, such as the bis central bankers ’ speeches bcl regulation 2009 / 4 requesting banks to apply the bcbs “ principles for sound liquidity risk management and supervision ”. the bank actively participates in the shaping of the basel iii framework for liquidity risk measurement, standards and monitoring. taking due account of current regulatory developments, the bcl intends to publish further instructions to market participants on liquidity management before the end of this year. in the same way the bcl changed its architecture to comply with its liquidity surveillance mandate, it will also adapt to its unavoidable role in macroprudential policymaking in luxembourg. following the 2008 new mandate on liquidity surveillance, the bcl adapted its internal structure and resources so as to ensure that the luxembourg market and its financial actors are constantly subject to analytical and quantitative scrutiny so as minimize systemic liquidity risk in the luxembourg financial industry. the bcl has increased technical cooperation with regulators at the national and international level and