safeguard financial stability and mitigate moral hazard. for a country like the netherlands – a small open economy with a number of very large and interconnected financial institutions – addressing this problem is even more important. these institutions play a vital role in the dutch financial system and real economy. in order to tackle the sifi problem the basel committee together with the financial stability board are working on additional measures for systemic banks. these measures first involve more intensive supervision and a higher loss absorbing capacity, primarily to reduce the probability of a default of a systemic bank. this will mean that possibly systemic banks will be required to hold larger capital buffers. secondly, the measures involve improving the resolution capacity of national authorities and the requirement for systemic banks to develop recovery and resolution plans. this should help to make it easier to wind down any type of institution in an orderly fashion which will reduce the impact of a failure of a systemic bank. moreover, the basel committee is working on a proposal for a methodology to identify systemic banks. a distinction will be made between domestic and global sifis, and stricter rules will apply to the latter group of institutions. let me be clear, we are not talking about hundreds of banks, but rather a few dozens, which because of their size, interconnectedness, or limited substitutability could pose a risk to the international financial sector. this will help secure that at least the externalities associated with those institutions that are most interconnected on a global scale will be addressed. the temporary changed role of central banks besides basel iii, the financial markets have been influenced significantly by the activities of central banks. their role has dramatically changed in the crisis, owing to the unconventional policy measures, which are meant to be temporary. in autumn 2008, enhanced credit support to the interbank market was introduced in the euro area, by way of unlimited liquidity supply to banks against adequate collateral. this has supported monetary transmission and prevented a credit rationing of the private sector. for the same purpose, the eurosystem purchased covered bonds issued by banks on a limited scale. this program has already been completed last year. in may 2010, when the sovereign debt crisis erupted, the phasing out of the extended refinancing operations was temporary delayed and the securities markets programme started. this bond purchasing program aims at non - functioning eurozone bonds markets. bis central bankers ’ speeches the eurosystem buys bonds from monetary counterparties, while the liquidity creation is sterilised by the iss

yves mersch : risk management in times of non - conventional monetary policy keynote speech by mr yves mersch, member of the executive board of the european central bank, at the joint bank of portugal and european central bank conference on “ risk management for central banks ”, lisbon, 25 september 2017. * * * let me start by thanking you for coming to this joint ecb - banco de portugal conference, and the banco de portugal for hosting us on this occasion. i am delighted to see central bank risk managers, practitioners and academics here in lisbon to exchange views on risk management for central banks. this topic has gained such importance in recent years as central banks across the globe, including the ecb, have sharply expanded their balance sheets, even though the time for ever more of the same is behind us. like the many great maritime expeditions that started out from this country, some of our endeavours in recent years have taken us into uncharted territory. now is a good time to take stock of what we have learnt and map out what may come next. following stable principles in the eurosystem ’ s risk management framework the eurosystem has a clearly defined objective, enshrined in the treaty, to preserve price stability in the euro area. 1 the treaty does not speak of eligible counterparties, collateral haircuts or issue share limits for bond purchases. however, you would be mistaken in assuming that managing financial risks has no role in the eurosystem ’ s monetary policy implementation – especially in the light of the significant balance sheet expansion over the past few years. on the contrary, we have applied the guiding principles of our financial risk management framework in a stable manner. we established these principles long before we embarked on non - conventional policies, not least because we have a statutory obligation to lend only against adequate collateral. we continue to apply them to standard as well as non - standard policy measures. broadly speaking, these principles are protection, consistency, simplicity and transparency. this means that – if multiple monetary policy options exist to fulfil our mandate – we should select the measures that minimise our own exposure to financial risks. this idea is sometimes referred to as risk efficiency. these principles also imply that we aim to avoid undue distortions in the markets in which we operate. we trade at market prices and we adopt a risk - equivalent approach in setting our risk control measures. in addition, the principles require risk management to be an integral part of decision - making in the institution