that a central bank cannot be instructed to provide liquidity, even in a crisis. it has to assess the situation of each entity and decide independently. i will make a few remarks on the monetary financing prohibition – an important requirement flowing from the treaty with which the provision of central bank liquidity ( including in resolution ) has to comply. any assessment of liquidity provision against the prohibition of monetary financing requires a careful case - by - case analysis. the ecb has repeatedly stated in its – publicly available – convergence reports and in its opinions that financing by central banks, even when granted independently and at their full discretion, of credit institutions other than in connection with their central banking tasks, in particular the support of insolvent credit and / or other financial institutions, is incompatible with the monetary financing prohibition. financing insolvent institutions is a government task – indeed the ecb has identified criteria to distinguish between government tasks and central banking tasks. the ecb has also repeatedly clarified that while central banks may be involved in administering resolution measures, they should not finance them. national central banks could also administer resolution measures on a genuine agency basis on behalf and for the account of a third party, that is, the government or one of its entities. in this case, however, the central bank would not itself provide liquidity, but simply carry out these tasks like an agent. it is a primary law requirement that lending can only take place against “ adequate collateral ”. on the basis of this fundamental requirement, the eurosystem defines the rules and conditions for collateral to be acceptable, or “ adequate ”, for monetary policy purposes. this framework is set down by means of various ecb legal acts and instruments ( in particular in the general documentation guideline ). adequate collateral for the eurosystem ’ s monetary policy framework means, first, that collateral must fully protect the central bank against losses in credit operations as these losses are in principle, shared. consequently the eurosystem is required, under primary law, to act as a secured creditor. in concrete terms this is ensured through pledge or 2 / 7 bis central bankers'speeches repurchase agreements adequately secured by an asset capable of being appropriated, transferred and / or sold at first notice. a key point here is that a standalone guarantee has never been recognised as adequate collateral under our framework. guarantees can only play a limited role, namely to make up for the lesser credit quality of a given collateral provided by a financially sound counterparty. in no circumstances

would a guarantee “ cure ” the lack of financial soundness of a given counterparty, or the lack of collateral or a combination of the two, which is often the case in a resolution scenario. if a public guarantee can prevent insolvency, it is only after having tested its value in the markets. if a public guarantee serves to cut out the markets and replace them with central bank liquidity it would contravene the principle of an open market economy with free competition and could be seen as a circumvention of the monetary financing prohibition. indeed it is already questionable to what extent the counterparty is able to fulfil the criterion of financial soundness. finally, as i just mentioned, it is an important requirement in our framework that collateral can be freely realised and sold at a market price. in the case of a mere guarantee this is not obvious and thereby offers a standard of protection which is legally not comparable to appropriable collateral. if all prudential and regulatory shortcomings could be replaced by a guarantee, it would undermine the whole framework of prudential and monetary intervention and, in the case of public guarantees, the competition principles underlying an open market economy. this is particularly true if a guarantee in rem would be replaced by a blanket guarantee ad personam to a bank. why then not allow a guarantee for all the banks to maintain financial stability. a cure all guarantee that a central bank must accept is a handover of money creation to the government at eu or national level. the acceptance of own used government - guaranteed bank bonds in the past was therefore rapidly be curtailed by the governing council of the ecb. alongside “ adequate collateral ”, the second important layer of protection against the eurosystem suffering potential loss is the requirement to interact only with financially sound counterparties. without devoting too much time to the technical details, counterparties to eurosystem credit operations must fulfil certain eligibility criteria. in essence, an entity must not only be a licensed credit institution or a branch but also needs to be financially sound. article 18. 1 of the statute of the escb also allows the provision of liquidity to “ credit institutions and market participants ”, for example financial market infrastructures such as central counterparty clearing houses. but i will not reflect on this particular case if not to question that a credit institution in or close to resolution is still participating in the market if it would have the central bank as sole or predominant counterpart