moreover, the recent financial market turmoil has re - emphasised the importance and special nature of the banking sector in the transmission of monetary policy and determination of macroeconomic outcomes. contrary to the attitude taken in some academic critiques of the ecb ’ s monetary policy framework, developments over the past few months surely demonstrate that banks play a distinctive role in creating “ monetary liquidity ” that, in turn, is an important determinant of developments in credit and asset markets, in the evolution of the economy and ultimately of price dynamics. suggestions that securitisation and off - balance sheet activity rendered the analysis of bank balance sheet meaningless have now been revealed as absurd. attempts to shift activity off - balance sheet proved to be a chimera, as the financial turmoil forced re - intermediation of loans and credit risk onto the mfi balance sheet. in practical terms, analysis of the mfi balance sheet has provided an important “ close to real time ” insight into the behaviour of financial institutions, at a time when the macroeconomic outlook ( including prospects for price stability ) and the transmission of monetary policy were seen to be potentially strongly influenced by the behaviour of banks and the possibility of a “ credit crunch ”. in particular, a close analysis of the monetary data provided evidence that the flow of bank loans to households and corporations was not significantly impaired by the money market tensions observed in the second half of 2007 and early 2008, thereby tempering the messages coming from other data sources, such as the eurosystem bank lending survey and mfi interest rate statistics. this analysis has proved to be an important input into the assessment of financing conditions and thus in the analysis of cyclical dynamics of the economy, under both baseline and variant scenarios. as this brief description illustrates, the financial turmoil episode has demonstrated the importance of a number of the general principles governing monetary analysis with implications for our statistical requirements in this area. adopting a broad - based approach to analysis has proved fundamental. by implication, integrating the analysis of monetary data with information from a wide variety of sources – in particular, a wide set of financial statistics for both prices and quantities and the bank lending survey – has been crucial. moreover, to have impact on policy discussion, conclusions drawn from analysis of the monetary and credit data regarding loan supply conditions must be available in close to real time, supporting the need for timely monthly reporting of monetary statistics. of course, in current challenging circumstances, it remains too early to judge the success of our monetary analysis and,

course – eliminating the causes of the tensions, originating outside the money market. during this tumultuous period, the eurosystem remained, as usual, in close contact with other major central banks. in this context, on 12 december the ecb, the federal reserve, the bank of england, the bank of canada and the swiss national bank announced measures designed to address elevated pressures in short - term funding markets. in particular, the ecb participated in joint action with the federal reserve and the swiss national bank. the ecb provided a total of 20 billion us dollar in two auctions to eurosystem counterparties against ecb - eligible collateral. through its own actions as well as the joint efforts with other central banks, the eurosystem as well as the community of central banks have shown their capacity to cope with a number of challenges that euro and global money markets are currently facing. more than ever, in these periods of tensions, lucidity in the diagnosis, rapidity in the decision, and absence of complacency are of the essence. this total absence of complacency is particularly necessary as regards financial stability. financial stability i would now like to share with you our assessment of the financial stability situation, as described in the recent financial stability review. i will discuss briefly the role of financial institutions and supervisory authorities in coping with the present financial market correction. with financial systems undergoing a process of de - leveraging and re - intermediation, uncertainty surrounding the financial stability outlook for the euro area has heightened and may persist until it becomes clear how the potential balance sheet effects of the turbulence will be spread across individual financial institutions. clarity is also needed concerning liquidity commitments to off - balance sheet vehicles, and the magnitude of assets that may be re - intermediated back onto the balance sheets of euro area financial institutions. the process of improving clarity, which started when q3 2007 financial statements became available, will be advanced further when institutions publish their annual audited accounts for 2007 as a whole. given the uncertainties, the adjustment process in the financial system in the coming period may be challenging, and we have to be prepared to the materialisation of risks at any time. that being said, there are mitigating factors, including a broadly favourable economic outlook, the largely sound balance sheets of households and firms, and the generally sound capital positions of core financial firms. this should not, however, provide any grounds for complacency given the heightened uncertainties