increasingly being held on the balance sheet of the originator bank and pledged as collateral with the central bank. second, non - marketable assets and above all, credit claims ( i. e. normal bank loans ) have become the largest single asset class in our collateral portfolio. third, uncovered bank bonds constituted the largest marketable asset type in 2009, mostly in non - guaranteed forms. however, the absolute amounts and the share started to decline sharply thereafter, due to subdued issuance volumes, increased risk aversion and concerns about the counterparty risk. in addition to the decrease in issuance, downgrades of banks have rendered a large part of this collateral non - eligible for eurosystem operations. as a result, guaranteed unsecured bank bonds now dominate non - guaranteed bank bonds. finally, due to the implementation of the two 36 - month refinancing operations conducted in december 2011 and february 2012, posted collateral in general increased, and in particular the use of covered bank bonds, which has lately become the largest marketable asset type in our collateral framework. it is equally important to analyse whether the observed scarcity of collateral in some regions follows a cyclical or a structural pattern. if it is cyclical it is mainly the result of the prevailing uncertainties in the markets and the perceived heightened counterparty risk that leads market participants to move from unsecured to secured funding, thus increasing their needs for collateral. such moves could in principle be reversible, once confidence in banks ’ resilience improves again. it has been argued however that a continued decline in, or even disappearance of, unsecured funding could have permanent effects on the balance sheet structure of banks. so, although central banks may have taken a number of measures to address the current stress on banks ’ balance sheets ( enlarging the collateral framework, purchasing assets, extending longer term this figure includes the haircuts applied by the eurosystem. bis central bankers ’ speeches liquidity, implementing non - recourse repos or swapping them with more liquid assets ), these measures can be rolled back or discontinued as soon as the crisis subsides. a structural change in the demand for collateral, on the other hand, would be more the result of a series of regulatory changes ( such as the liquidity coverage ratio under basel iii, regulatory changes on derivatives trading, the proposed capital charges in solvency ii for insurers, making it more attractive to hold covered bonds, and

resilience remains crucial. existing releasable macroprudential capital buffer requirements and adequate borrower - based measures should be maintained to ensure that banks can absorb any future shocks. at the same time, the policy framework for non - banks should be improved from a macroprudential perspective to strengthen the sector's resilience. finally, to mitigate the current risks to sovereign debt sustainability, it is important to implement the eu's revised economic governance framework fully, transparently and without delay. given the structural challenges related to low potential growth, the consolidation of public finances will need to be designed in a growth - friendly way. 3 conclusion let me conclude. in december we decided to further moderate the degree of monetary policy restriction, lowering the key ecb interest rates by 25 basis points. this decision was based on our updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. we are also continuing the process of balance sheet normalisation. in december the last repayment of the targeted longer - term refinancing operations was completed and reinvestments were discontinued. we are determined to ensure that inflation stabilises sustainably at our 2 % mediumterm target. given the high level of uncertainty, we will continue to follow a datadependent and meeting - by - meeting approach to determining the appropriate monetary policy stance. the high level of uncertainty calls for prudence. in particular, severe global trade frictions could increase the fragmentation of the world economy, uncertainty about fiscal policy and its present challenges could weigh on borrowing 3 / 4 bis - central bankers'speeches costs, and renewed geopolitical tensions could affect energy prices. we are therefore not pre - committing to a particular rate path. if the incoming data confirm our baseline, the policy trajectory is clear, and we expect to continue to further reduce the restrictiveness of monetary policy. 1 i am grateful to adriana grasso, max lampe and thomas mcgregor for their contributions to this speech. 2 baumann, a., l. caprari, g. kocharkov and o. kouvavas, ( 2025 ), " are real incomes increasing or not? pessimism and its impact on consumption ", forthcoming in economic bulletin, issue 1, ecb. 3 see draghi, m. ( 2024 ), the future of european competitiveness, september, and letta, e. ( 2024 ), "