, make the development of a comprehensive macroprudential supervision absolutely essential. ecb monthly bulletin, july 2010. an effective macro - prudential framework aims at delivering a thorough analysis of systemic risks, as well as the formulation of appropriate policies to address such risks identifying, in a timely fashion, the emergence and build up of critical vulnerabilities, and deciding on effective ( pre - emptive ) intervention. central banks have a very important role in this regard. at the european level, a new body will be set up : the european systemic risk board ( esrb ), which will be an independent body responsible for conducting macro - prudential oversight of the eu ’ s financial system as a whole and which will be supported analytically and logistically by the ecb. the esrb should be seen as a component of a global framework of macro - prudential oversight, also allowing it to contribute to the assessment and containment of global risks. in this sense, systemic risk surveillance and preventing those risks from materializing will be a key contribution to sustainable long term growth prospects. conclusion let me conclude. the global crisis of the last years has shown that policymakers around the globe have acted successfully. confidence has come back. with our policy actions, we at the ecb have supported credit flows to the economy and thus dampened the negative effects of the crisis to the extent possible. looking ahead, we now need to draw lessons from the crisis and focus on the elements that ensure that the global recovery is sound and sustainable. for this, i believe four elements are essential. these are strengthening growth prospects, fiscal sustainability, price stability and financial stability. for price stability and financial stability, central banks play a key role. they will shape the global recovery by maintaining price stability and safeguarding financial stability. price stability is the central contribution that monetary policy makes to economic growth, to job creation and to financial stability. financial stability, in turn, will be a major focus of policy - makers in the aftermath of the crisis. central banks have specific tasks and responsibilities in this domain. for example, the ecb will contribute to the esrb to conduct macro - prudential oversight at a european level. of course, central banks cannot act alone. actions are required to address all conditions and challenges to spur long term economic growth. we all have to work together. national governments, regulators and supervisors, and the private sector and financial industry have to proceed with the difficult, but vital, measures

speech back to normal? balance sheet size and interest rate control speech by isabel schnabel, member of the executive board of the ecb, at an event organised by columbia university and sgh macro advisor new york, 27 march 2023 on 1 march, the ecb started quantitative tightening ( qt ) after eight years of balance sheet expansion. at the peak in 2022, the eurosystem held monetary policy assets corresponding to around 56 % of euro area gdp. this was substantial both from a historical perspective and in international comparison ( slide 2, left - hand side ). the first wave of balance sheet expansion was a response to the low - inflation environment prevailing in the aftermath of the euro area sovereign debt crisis. between 2014 and 2016 headline inflation ran persistently below our target of 2 %, averaging just 0. 3 % ( slide 2, right - hand side ). as the key policy rate had already been lowered into negative territory in 2014 and was approaching the effective lower bound, the ecb started employing “ unconventional ” monetary policy tools. it offered banks a series of targeted longer - term refinancing operations ( tltros ) and conducted asset purchases to stimulate economic activity and raise inflation. these operations led to a sharp increase in monetary policy assets and, correspondingly, to a rise in central bank liabilities in the form of excess reserves – that is, reserves held by banks beyond minimum requirements ( slide 3 ). the second wave of balance sheet expansion came with the ecb ’ s response to the pandemic. the launch of the pandemic emergency purchase programme ( pepp ) and adjustments to the third series of tltros resulted in a further large increase of our monetary policy assets. these measures were necessary to protect the euro area economy from falling into a full - blown financial crisis and economic depression. last july, balance sheet growth came to a halt when we ended net asset purchases under the asset purchase programme ( app ). since autumn, the size of the balance sheet has been declining as banks began repaying their outstanding tltro loans. the balance sheet has declined further since the beginning of march, when we stopped fully reinvesting maturing securities bought under the app. further tltro repayments and a gradual run - down of our monetary policy bond portfolio imply that our balance sheet is expected to decline meaningfully over the coming years, thereby reducing excess liquidity. however, the size of our balance sheet will not return to the levels