would like to elaborate on what a central bank digital currency might mean for cash. 2 cash in times of crisis when economists talk about turmoil in markets, they are typically referring to unusually strong swings in asset prices. turbulence of that kind could arise, say, due to a sharp reassessment of perceived risks. in such a scenario, asset holders might be inclined to sell off large amounts of a particular asset as quickly as possible. by definition, the nominal return on cash is zero, but cash means liquidity and as central bank 1 / 3 bis central bankers'speeches money it offers that extra feeling of safety, particularly in times of crisis. demand for cash thus rises sharply during periods of elevated uncertainty. the covid - 19 crisis is no exception. in march 2020, when the german federal government was implementing the first nationwide lockdown, cash in circulation in germany increased by almost 21 billion euro. that represents a year - on - year increase of around 12 %. cash demand accelerated during the crisis, not just in germany but further afield, too. the increase was also not confined to isolated spikes during periods of lockdown, but occurred on a broader scale across countries. at the end of 2020, the overall value of euro banknotes in circulation was up by 11 % in the eurosystem. this annual growth rate is high by historical standards, considering a 5 % average increase over the past ten years. however, there is evidence to suggest that the use of cash as a means of payment has declined during the pandemic. we see that from the reduced numbers of smaller denominations that are flowing through the cash cycle in germany and beyond. at least with the recent easing of covid - 19 containment measures in germany, we have started to observe an uptick in cash lodgements at our regional branches again. there are also several surveys on payment behaviour that point to declining cash usage relative to digital means of payment. what does that imply for the role of cash going forward? in the middle of a crisis, that is hard to say definitively. many places where cash tends to be used frequently, such as cafes, outdoor events or street markets, have not been open as much during the crisis as they usually are. this has naturally placed a limit on the transactional role of cash during the pandemic. even so, the decline in cash usage during the pandemic has been more than offset by its important function as a store of value. cash offers a safe haven

the short - term benefits of rescue operations are given priority over the long - term benefits of incentive - compatible financial markets. therefore, maintaining a long - run perspective in crisis management is of the utmost importance for the policymakers involved. the very existence of suitable – ie, in the long - run, stability enhancing – crisis resolution mechanisms increases the credibility of macroprudential policies. it has a positive impact on market discipline and so contributes to a more stable financial system. financial crisis management is more effective when it can take advantage of the market forces instead of combating or suspending them. that is an important guideline for today ’ s challenge. undoubtedly, the vigour and the systemic nature of the current crisis call for immediate and determined action. the efficiency of the measures hinges on the mobilisation of private investment. public funds cannot, and should not, resolve this crisis alone. transparency is key for encouraging private capital and for restoring market discipline. in the current context, for example, it is vital to remove uncertainty on how politics envisage dealing with greek debt going forward. the systemic nature of the crisis entails severe contagion triggering a loss of confidence in european banks. to raise the banks ’ resilience, a temporary additional capital buffer is under discussion. there cannot be any doubt that credibility is crucial for restoring confidence. gaining credibility calls for a realistic valuation of all relevant exposures and for setting an ambitious benchmark for minimum capital buffers. while it goes without saying that it was not the banks that are responsible for the current sovereign debt crisis, i can understand the debate which is ongoing about the possible recapitalisation of european banks. admittedly, earmarking the temporary core tier 1 benchmark appears, to some extent, arbitrary. however, a prudent approach tends to emphasise the downside risk. therefore, it is in my opinion much better to err on the high side so that the worst case does not materialise. for example, a core tier 1 ratio for systemically relevant banks in europe of 9 % after realistic mark to market of risks, introduced with the right sense of proportion, could be feasible and could provide reasonable comfort. following the principle of prioritising market solutions, there is a clear order. as a principle, the banks should address the capital markets first. only private banks which fail to raise private capital would receive a public capital injection. as a provider of last resort, the efsf can make