firm conviction that macroprudential policy is an effective tool in curbing systemic risk. let me go back here once again to the lessons of the great recession. it showed us that microprudential regulation and supervision alone are not enough to safeguard the financial system. it became evident that boom - and - bust cycles in asset prices required additional instruments. the crisis was therefore a catalyst for the rise of macroprudential policies – including in lithuania, which was hit particularly hard by the boom - and - bust cycle. house prices dropped sharply, by 30 % in 2009, which was the second worst drop in the entire eu. the housing market crash went hand - in - hand with the broad - based economic downturn – the crisis wiped out almost 15 % of lithuania ’ s output that same year. i think the magnitude of the shock made us learn our lesson. in post - crisis years, lithuania has been eager to find an effective combination of macroprudential policy measures. in 2011, we were among the first in the eu to introduce responsible lending regulations and establish restrictions on lending standards for housing loans, namely loan - to - value, debt - service - toincome, and loan maturity. moreover, macroprudential capital buffers were introduced as soon as they became available in the european regulation from 2015. to prepare against potential shocks in the future, the counter - cyclical capital buffer rate in lithuania had been raised up to 0. 5 % in 2017 and to 1 % in 2018. all combined, lithuania features one of the most comprehensive sets of macroprudential policy measures in the eu. this makes us a very good case to examine – in practice – the effectiveness of the macroprudential policy framework under extreme covid - 19 conditions. prior to this year, critics would say that our macroprudential set - up was perhaps too wideranging and excessive. but this crisis showed, i believe, that our policy stance was the right one. crucially, it helped prevent a deterioration of lending standards and the build - up of systemic risk in the run up to the covid - 19 shock. the stock of loans to households and house prices were growing in line with gdp and household income. this contributed to the decrease in the nonperforming loan ratio – from as much as 20 % in 2010 to only 1. 7 % in the first quarter of 2020. banks were making profit while maintaining solid capital buffers. as a result

to those market segments where they were most needed. as a result, the ecb has stabilised financial markets in an effective manner. crucially, the ecb also acted to facilitate access to euro liquidity outside the euro area to counter potential market dysfunction. for instance, the eurosystem set up new precautionary swap line agreements with the croatian and bulgarian central banks. we also established new bilateral repo agreements with the central banks of albania, hungary, romania, and serbia. this is in addition to the launch of eurep – a repo facility not limited to a particular counterparty, but available to a broader range of central banks. the eurosystem ’ s swap and repo agreements help the ecb prevent forced asset sales by the receiving central banks, containing the risk of financial instability in the euro area and the neighbouring regions. in other words, these are arrangements of mutual benefit. going forward, the governing council stands ready to adjust its instruments or develop new ones to ensure robust convergence of inflation towards our medium - term aim. this includes the possibility of increasing the size of our asset purchase programmes and adjusting their composition. in view of high uncertainty regarding the course of the pandemic, monetary support by central banks, as well as fiscal support by governments, will remain vital in the foreseeable future. policy cliff - edge – premature withdrawal of support measures – would certainly hamper the already fragile recovery and could have a negative effect on financial stability. we should not rush the time of this landing. 2 / 5 bis central bankers'speeches limits to euro - area monetary policy accommodation there is one issue i would like to point out in this respect. despite the overall strength of the fiscal action on the aggregate level, the fiscal policy response among euro area countries has differed in terms of size and composition. such a trend may reinforce the asymmetric effect that the pandemic has had on the euro area economies. in this context, i would like to recall a phrase that was popular in the central banking community prior to the current crisis : monetary policy cannot be the only game in town. or, rather, it cannot once again become the only game in town. in a currency union, this is all the more true when the economy - wide shock is not overcome to the same level of success in all of its parts. we cannot rule out the possibility that diverging prospects may ultimately pose new challenges to long - term debt sustainability in certain euro area economies.