. but we will also consider whether there are areas where we have taken new risks onto our balance sheet – and consequently where certain elements should be kept. the developments i have just described offer some insights into how the future steady state risk management framework might look. at the moment, i see four key features : first, while the temporary collateral framework has successfully eased potential collateral shortages, it could be argued that it should not become part of the regular framework. as liquidity demand declines, there will also be less need for an expanded set of eligible collateral. whether some temporary measures might be transformed into a state - contingent framework, ready to be activated again in the future if circumstances so require, is an open question. as experience shows, each crisis needs a tailored response. second, we will need to keep the flexibility to adjust the collateral framework to financial innovations, especially when it comes to complex new financial products. the new “ simple, transparent and standardised ” securitisation regulation is a case in point. it will allow us to better assess the collateral we accept. in a similar way, we will need to forcefully deal with new types of securities, such as conditional pass - through covered bonds, whose risks may not yet have been fully appreciated. 3 / 4 bis central bankers'speeches third, we will have to retain the risk control frameworks for the asset purchase programmes beyond the horizon of our net asset purchases. as long as we keep outright portfolios on our balance sheet, the reasons behind the risk control measures, including eligibility criteria, purchase limits, benchmarks ensuring diversification and the different risk - sharing agreements, will continue to apply. fourth, the governing council will have to decide whether we ought to rely more on our own judgement about the quality of assets and counterparties and to further expand eurosysteminternal credit assessment systems, steps which would require additional resources. it means further enhancing the due diligence on external credit ratings, for which sufficient transparency on the judgement underlying these ratings is essential. and it means using supervisory information to ensure an efficient implementation of monetary policy operations – the introduction of the european single supervisory mechanism has brought about fundamental improvements here, as it allows for the sharing of relevant information within the legal limits of the separation principle. to conclude, i believe the eurosystem ’ s risk management framework has successfully weathered the financial storms of the past few years. the reason is that we followed stable principles when the size of our operations, the assets accepted as collateral

for policy decision - making. the entry of the czech republic into the european union in may 2004 has not so far created any serious issue in respect of the practical forecasting of the czech economy. however, we can identify two issues related to the future development of the forecasting system. the first one relates to the comparability of the cnb ’ s forecast with the rest of the forecasts produced by the escb members. as i mentioned earlier, the cnb produces an unconditional forecast that includes a reaction function of the central bank. however, this is not the case with the rest of the escb members. although there is a tendency towards the use of unconditional forecasts and the bank of england and sveriges riksbank have started to use at least the trajectory of the short - term interest rate derived from the money market term structure instead of an assumption of a constant short - term interest rate as a base for their forecasts, conditional forecasting still plays a crucial role among the escb members. this, of course, seriously reduces the comparability of the results. second, the forecasting system and the modelling framework have not yet been adjusted to our expected entry into the erm ii and the euro area. erm ii participation clearly raises the question of consistency between the “ low ” inflation environment required by the maastricht inflation criterion and stability of the nominal exchange rate, both in a converging economy. recent experience among the new eu member countries provides some evidence on the difficulties of fulfilling the maastricht inflation criterion amid a stable exchange rate. the issue to be solved is to what extent the forecasting system should reflect the dualism of the targets, or whether the policy rule should consider the inflation target only, leaving the exchange rate as a fully endogenous variable. similarly, the forecasting system will have to be adjusted once the czech republic enters the euro area and policy is set by the ecb governing council. it is worth mentioning that the development of our forecasting system has been part of the wider evolutionary process that the czech inflation targeting regime has gone through. the first years of the new regime were not easy, and included frequent numerical target misses. nevertheless, the czech republic enjoys low inflation, and inflation expectations seem to be firmly anchored at low levels at present. monetary policy decision - making is rule - based and transparent, thereby enhancing the credibility of the cnb. let me conclude with the statement that a