##inancing operations or by setting up a discount window that ensures that banks with unexpected temporary requirements can refinance themselves. while markets listen to central banks, central banks also listen to markets since the price formation in markets reflects agents ’ expectations, in particular concerning inflation, and their assessment of risks ; central banks require such information to make their analyses and take their monetary policy decisions. the smooth functioning of markets and financial stability are therefore essential for the effective transmission of monetary policy. if the shape of the yield curve is evolving regardless of monetary policy decisions, if risk premia are uncorrelated with fundamentals, if market liquidity dries up, then the interest rate channel ceases to function. when this affects banks ’ funding, in particular via a freezing of the interbank market, the bank lending channel seizes up. in such circumstances, central banks must turn to non - standard measures such as direct aggressive interventions to ensure that their monetary policy decisions are effectively transmitted and that markets keep ticking over. needless to say, the recent period has seen many such incidents as well as the implementation of many non - standard measures. among the measures currently in place, some are based on “ quantitative easing ”, which involves the purchasing of securities primarily with a view to generating excess liquidity that in turn moves into all market segments and fosters a better refinancing of the economy ; others are based on “ credit easing ” and aim to restore the functioning of certain particularly disrupted market segments. seen from another angle, certain policies aim to restore the smooth functioning of the interest rate channel by directly impacting the yield curve, others aim to restore the bank lending channel by ensuring that banks can obtain funding beyond the very short - term maturities to which central banks usually confine themselves. in all events, central banks stand in for failing market participants or markets. since 2008, we have seen the fed come to the rescue of the us commercial paper market and the mortgage backed securities market ; we have seen the bank of england purchase in the space of a few months gbp 200 billion in government securities, representing around 15 % of the united kingdom ’ s gdp ; the eurosystem, for its part, has conducted massive oneyear refinancing operations with euro area banks and has kick started the covered bond market, via its eur 60 billion purchase programme. next may, it also start intervening in the government securities market. this calls for further clarification in the light of my earlier

his remarks at the literaturhaus on october 20th claudio magris, rightly considered the “ most european ” of contemporary italian writers, described the european identity not as a set of roots delving down into the earth but as the branches of a tree reaching outward and intertwining with the branches of other trees. to me, this image is most evocative. each of the individual national identities that contribute to our european identity is exactly like a tree, with its own deep roots in history and centuries ’ worth of fruit, but above all horizontally outstretched towards transparent, vital enlacement with its equally fruit - laden neighbours. in closing, let me offer my best wishes to governor noyer – and to the european central bank – for the preparation of next year ’ s cultural days. i am curious to learn the programme of events devoted to french culture. i am certain that frankfurt will be treated to the best of france ’ s immense cultural heritage, in its profoundly european dimension yet also bearing the signs and the fruits of its contact with the other great civilizations of the world. bis central bankers ’ speeches