have developed the set of principles and contingent courses of action that will govern the gradual and progressive exit from the set of non - standard measures currently in place. indeed, no orderly departure from the current set of policies can be achieved in the absence of a well - designed and clearly communicated exit framework. moreover, if current public policies are ultimately to be successful, the development of a credible exit strategy is almost as important as the nature and magnitude of the policies themselves. it goes without saying that discussing the appropriate design of an exit strategy should not necessarily be interpreted as signalling imminent policy actions. i would like to structure my speech today around five specific questions related to the exit from the set of non - conventional monetary policy measures. first, i would like to discuss i am grateful to john beirne, ulrich bindseil, alessandro calza and simone manganelli for inputs and comments. “ whence ” we are exiting. for this purpose, i will briefly recall the main characteristics of the eurosystem ’ s approach to non - conventional monetary policy. then, i would like to elaborate on “ why ” we need to exit such policy. i will then say a few words on “ whither ” we will exit, particularly as regards the monetary policy implementation framework. i will then discuss “ how ” we are going to exit the set of measures currently in place and, finally, “ when ” we will do so. whence? following the intensification of the financial crisis in the autumn of 2008, inflationary pressures rapidly receded, prompting the ecb to undertake a series of aggressive cuts to its official policy rates. between october 2008 and may 2009, the ecb ’ s central policy rate – the interest rate on the main refinancing operations – was lowered by a cumulative 325 basis points. the speed and extent of the monetary loosening experienced over this period are without precedent since the ecb took responsibility for the conduct of monetary policy in the euro area. this is, of course, a rather short period, just over a decade. however, even if we look at the much longer historical experience of the national central banks forming the eurosystem, such as the deutsche bundesbank, it is not possible to find anything similar. the severity of the economic contraction, with the ensuing downside risks for price stability, prompted the ecb to introduce additional measures that allowed it to ease monetary conditions above and beyond what could be achieved through the interest rate instrument alone. thus,

liquidity at favourable conditions may end up propping up banks that are unable to fulfil their funding needs, even under normal market conditions. this may give rise to concerns about whether the necessary adjustments and restructuring in the banking system have taken place. some considerations can also be made with regard to the collateral framework and to certain practices on collateral use that have emerged over the past two years. as mentioned earlier, the eurosystem has always accepted a broad range of public and private securities, including unsecured bank bonds and asset - backed securities ( abs ), as collateral in its refinancing operations. having an extensive definition of eligible collateral has proven very useful during the crisis to mitigate refinancing risks for several classes of assets. indeed, in the course of the crisis counterparties have made active use of the refinancing opportunities provided by the eurosystem ’ s refinancing operations and have deposited as collateral some eligible assets for which market liquidity had basically dried up. in particular, many abs transactions have not been placed in the public market, but have been retained onto the balance sheet of the originator and / or privately placed to be used as collateral in central bank facilities. at the same time, banks have economised on the use of the most liquid categories of assets ( such as central government bonds ) in order to save them for private repo transactions. as market conditions normalise, banks will need to make efforts to overcome the present large - scale use of self - originated abs as collateral in eurosystem credit operations, and instead place these securities with investors. this requires efforts to meet investor standards, in particular by improving the transparency, simplicity and the degree of standardisation of transactions. the eurosystem is prepared to contribute as far as it can to the reactivation of the abs markets. the eligibility criteria and risk control measures of the eurosystem ’ s collateral framework are an important tool in this respect. reactivating abs markets would be, first of all, in the interest of banks as it would restore a major source of funding. it would also benefit the eurosystem, as it would reduce the extra financial risks resulting from the inevitable links between counterparties and the self - originated abs submitted as collateral. the ecb is aware of these risks, and has already mitigated them through a number of specific measures, such as the prohibition of some types of close link, the raising of the rating threshold for abs