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– were born out of the need for market - makers in previously unknown types of securities. the emergence of these new categories of investors and financial intermediaries, the behaviour and incentives of which can be quite different from those of traditional market players ( such as banks ), 11 in combination with product innovation, has probably changed the way that shocks spread across financial markets. this probably also has an effect on the way that monetary policy impulses are transmitted to the rest of the economy. the proliferation of financial intermediaries adding value primarily by securitising and making liquid – i. e. rendering tradable in the market place – assets that until a few years ago would have been highly illiquid and remained on banks ’ balance sheets has increased the ability of the financial system to create and supply liquidity. however, if the securitisation of illiquid assets such as mortgage loans is fostered by unsustainable dynamics in the price of the underlying assets, and if the products are not sufficiently transparent, an “ originate and distribute model ” that seeks to create market liquidity in this way can increase systemic risks and ultimately increase the risks to price stability. the mechanism that was, until last summer, fuelling the creation of liquidity and credit could start to work in the opposite direction. regulatory weaknesses allowed the explosion of credit creation on the basis of what, ex post, have clearly been shown to be faulty assumptions regarding the true level of market risk. beyond these considerations, however, the question for policy - makers is whether central banks ought to be more active in such circumstances and adapt their conduct to the changes that have occurred in the monetary transmission mechanism. in my view, the ecb has shown itself to be ready to take all necessary steps to ensure the provision of sufficient liquidity to allow the financial system to continue functioning properly. since the first signs of strain appeared in the money market, the ecb has provided additional liquidity to money markets. rajan ( 2006 ). liquidity - providing measures should by no means be confused with a weakening of the monetary policy stance. the ecb remains firmly focused on price stability, with its policy stance reflecting the governing council ’ s assessment of the risks to price stability in the euro area. central banks should devote maximum effort to understanding the extent to which the transmission channel of monetary policy may, in a stable macroeconomic environment, be affected by a high degree of integration in global financial markets and ever more complex market micro