policy and security fields. a number of political initiatives and institutional innovations are being prepared in this context. extending the european zone of stability and prosperity also requires sound economic and monetary conditions, including a functioning financial system in the regions concerned. the eurosystem has noted the unilateral decision of the montenegrin government to introduce the deutsche mark - effectively the euro - as a parallel currency in its territory, following on from a similar decision by the united nations administration in kosovo. in this context, i should like to make it absolutely clear that such unilateral action in no way commits the eurosystem. it is rather the case that in our monetary policy decisions we will always follow the precise mandate given by the treaty - namely to maintain price stability in the euro area over the medium term. in the past, the european union has often been accused of being “ obsessed with its own internal dynamics ” and having little regard for the outside world. however, not least as a result of the introduction of the euro, the eu must increasingly look beyond the confines of the european continent and shoulder its responsibilities with regard to securing a well - functioning world economy. it is to these external challenges that i shall now turn. 3. europe and the eurosystem in the world economy the euro is the currency of an economic area with a population of nearly 300 million people and one - sixth of the world ’ s gross domestic product. both figures will increase as new countries adopt the euro. after the us dollar, but ahead of the japanese yen, the euro is the second most widely used currency on a worldwide scale. with these facts in mind, it can be expected that the euro and the eurosystem will hold a significant position in the world economy. what is more, i believe it would not be an exaggeration to state that, with its single currency, the european economy is set to play a role of systemic importance. that said, the eurosystem does not actively promote an international role for the euro, nor do we seek to hinder it. there is and shall be no policy of challenging the position of the dollar, nor that of any other currency. by adopting this neutral stance, the development of the euro into an international currency is left to market forces. if the eurosystem is successful in maintaining price stability it will almost automatically foster the euro ’ s international role. it is difficult to predict precisely at what pace the euro will acquire its international role. if history is any guide

a whole. though our credit operations and risk mitigation measures are in some ways similar to collateralised lending operations by commercial banks, 1 the financial assets we take as collateral and the lending rate we set are the same for all borrowers. that, in turn, requires a risk control framework which aims to achieve risk equivalence across all assets accepted as collateral. second, our primary goal is to maintain price stability. so, unlike commercial banks whose fiduciary responsibility is to maximise their financial income, central banks have to consider the wider macroeconomic picture when they set their risk management frameworks. this is why central banks ’ exposure to financial risks can – and may indeed have to – increase in 1 / 4 bis central bankers'speeches order to honour their mandates, while commercial banks typically aim to reduce risks during crises. in exceptional times, central banks may need to take more risk on their own balance sheets so as to reduce risks for the financial system as a whole. this contributes to financial stability and, ultimately, to price stability. still, this is not to say that managing financial risks is not important for implementing the eurosystem ’ s monetary policy. quite the opposite, in fact! just as a commercial bank must comply with its regulations, a central bank must follow its mandate and the risk management principles therein. 2 for us at the ecb, these principles, which were established long before we embarked on non - conventional policies, underpin all our policy measures. broadly speaking, the principles are protection, consistency, simplicity and transparency. they imply that – if there are several monetary policy options that we can take to fulfil our mandate – we should select the measures that minimise our own exposure to financial risks. this idea, which underpins all risk management ( including in commercial banking ), is known as risk efficiency. in addition, our principles require risk management to be an integral part of our decision - making. and we embody transparency and simplicity by being rules - based and as predictable as possible in our operations. this commitment to risk efficiency is vital for several reasons. first, central bank revenues are public funds, meaning any losses by central banks are losses for the public purse in each euro area country. second, losses can affect the financial independence of central banks and therefore, potentially, their operational independence. third, losses can harm our credibility and reputation in the eyes of the public, and thus their confidence in the central bank to maintain price stability. for these