##ider, what type of monetary policy implementation framework suits best for the eurosystem in the longer run. as a result of our framework review, the eurosystem will move back towards a system in which marginal liquidity is eventually supplied through short - term credit operations at a fixed rate and with full allotment procedure. hence, the new framework can be seen as a move from a supply - driven balance sheet towards a demand - driven one. in some sense, this marks a natural return towards our original thinking that led us to design a demand - driven system based on refinancing operations, and a liability driven balance sheet. we have started a journey to normalize our balance sheet, but its size will be different from what it was before the series of crises started some 15 years ago. the natural size of our balance sheet has doubled thanks to the increase in the autonomous liquidity factors. furthermore, we will continue meeting the banks'demand for reserves in full also in the future. hence, this demand will be an important driver of the overall amount of liquidity and thus also the size of the central bank balance sheet. yet, even if there 2 / 3 bis - central bankers'speeches are uncertainties in the way, our direction is clear, we will be unwinding the legacy monetary policy outright portfolios, and this process will take quite some time before we introduce new ways to provide the banks with their structural liquidity needs. as there are many uncertainties around the monetary policy implementation landscape today, we must stand ready to react and calibrate the size and composition of our balance sheet also in the future if and when monetary policy does not transmit smoothly. after all, monetary policy operational framework needs always to serve our monetary policy ultimate goals – price and financial stability needs will always dominate in our thinking about the optimal balance sheet. so, in the eurosystem, we will carefully monitor the evolution of all the relevant markets and indicators and stand ready to adjust the framework design and parameters if necessary. thank you for your attention. i am looking forward to our discussions in which we may dig deeper into the design of central bank operational frameworks. 1 one could add gold and imf receivables to the natural central bank assets, but when netted with their liability side counterparts ( revaluation accounts and imf special drawing rights ), their volume would not change the big picture. 3 / 3 bis - central bankers'speeches

, i would conclude that the liability side dominates the determination of the natural size of the eurosystem balance sheet size. thus, it would be natural for the euro area banking sector to operate in a liquidity deficit, and for the eurosystem to cover this structural liquidity gap by providing central bank reserves with its monetary policy 1 / 3 bis - central bankers'speeches instruments. accordingly, originally the main refinancing operations were used as the marginal tool for liquidity provision, and the mro rate was setting the starting point of the euro yield curve. this framework lasted until the global financial crisis. now, even if we can derive rather easily this kind of a natural starting point for the central bank balance sheet, it is not the end of the story. natural balance sheet size does not need to equal its optimal size. from time to time, the quest for price stability and the need to facilitate financial stability, may call the central bank to make nonstandard monetary policy interventions, resulting in liquidity provision beyond the structural liquidity needs of the banking sector. in such a case, at some point, the asset side starts to dominate the size of the balance sheet, and the rate at which the excess liquidity is drained becomes the instrument for setting the interest rates. this has been, as you well know, the case for the eurosystem for a decade or so. first to address the risk of entering into a deflationary spiral, and then to address the financial stability concerns posed by the pandemic, the governing council engaged in large scale asset purchases. accordingly, for more than a decade now, the asset side has dominated our balance sheet, and we've been steering money market rates with the rate applied to banks'deposits with us. the switching from liquidity provision to draining it, was not a deliberate decision based on monetary policy implementation aspects nor the optimal balance sheet structure. monetary policy implementation changed fundamentally as the world around us changed, requiring monetary policy responses that strongly shaped our balance sheet. the need to guarantee financial stability when the global economy is being hit by a pandemic clearly increased the optimal central bank balance sheet to levels significantly larger than the natural size would imply. now that those forces are no longer prevailing, we've been able to return to setting monetary policy stance with our standard tool ( interest rates ), and to scale back the extraordinary provision of credit to banks. this has been an opportune moment for us to recons