, the scene with the bank run was omitted! banks could still fail, of course, because of capital erosion, and even entire banking systems could do so, as in the nordic banking crises in the late 1980s and early 1990s. but the liquidity risks inherent in fractional banking were mostly contained. it was an important causal element of the financial crisis that part of the financial sector had escaped this safety net. this applied in particular to cross - border banking. let me take two examples to illustrate this. thornton and bagehot are the classical references : henry thornton ( 1802 ). “ an enquiry into the nature and effects of the paper credit of great britain ”. london : george allen & unwin. bagehot, walter. 1866. “ what a panic is and how it might be mitigated ”. republished in collins, michael. 1993. central banking in history. vol. 7. aldershot, england. edward elgar, walter bagehot ( 1873 ). “ lombard street : a description of the money market ”. goodhart and dimitrios give a recently published summary of the historical development of the financial stability role of central banks : charles goodhart and dimitrios p. tsomocos ( 2012 ). analysis of financial stability. in “ the challenge of financial stability : a new model and its applications ”, eds. charles goodhart and dimitrios p. tsomocos. edward elgar. cheltenham, uk. bis central bankers ’ speeches first, the euro area as a whole had a more or less balanced current account position during the build - up to the financial crisis. a fact that drew less attention at the time, however, was that european banks had built up huge usd - denominated balance sheets that had mismatches, especially in terms of maturity. this became a major problem when there was a run on the dollar - denominated bank liabilities of non - us international banks post - lehman. 3 second, the icelandic banking system expanded very rapidly prior to the crisis, growing in just five years from a combined balance sheet of less than 2 times gdp ( at the end of 2003 ) to almost 10 times gdp ( in mid - 2008 ). most of this expansion was cross - border, and a significant part of it was really off - border, having very little to do with iceland, as both financing and investment took place abroad. this was facilitated by two factors : first, iceland ’ s membership in the european

established payment infrastructure of banks and other payment service providers. we would be best positioned to achieve our common goal of pan - european reach. in addition, it would respect the role of intermediaries and offer room for innovation as well as for local specificities or different payment habits. the role of the private sector would include offering wallets, for example. supervised intermediaries would conduct kyc ( know your customer ) and aml ( anti - money laundering ) checks. moreover, they would provide the devices and technologies needed for payments online, in stores or person - to - person, in order to cover the envisioned use cases of a digital euro. 6 for sure, the authentication of transfers, too, would have to be arranged by the private sector. to give you a better impression : an app could be used for direct person - to - person payments and also when shopping online. the analysis of these devices and technologies – the so - called form factors – is one of the aspects the eurosystem's project on a digital euro is covering at the moment. 4 what is the current status of the digital euro project? during the current investigation phase, experts from the ecb and the national central banks are working together on aspects such as the aforementioned functionalities, design choices, business options for intermediaries and use cases. the bundesbank is closely involved in the project. i myself am a member of the high level task force, the steering committee of the digital euro project. we have already come a long way : in october 2020 we published a report with thoughts on a digital euro. now we are already in year two of the ongoing investigation phase, envisioned to take two years. since we are well aware that the success of a digital euro cannot be taken for granted, we are taking our time in order to fully reap the benefits while at the same time containing the potential risks, like the danger of digital bank runs or a widespread shift of deposits from commercial banks to the central bank. this is why, as part of the project, we are considering effective countermeasures that could include maximum amounts or graduated interest rates. what other aspects are particularly important, in our view? we want to pay particular attention to ensuring that all citizens in the euro area have access to a digital euro. in this context, an offline functionality is currently under consideration. however, high safety standards would need to be met. it is absolutely necessary for such a system to mitigate any