was merely a theoretical notion taken into account when characterising the solutions of monetary models. it has, however, become a concrete concern for monetary policy in the last two decades, first in japan, then in most other developed economies. central banks have consequently become interested in the formerly abstract zlb topic. and, because storage and transportation costs of cash are non - negligible in reality, the notion of an “ effective lower bound “ of policy rates has emerged that is lower than zero. that monetary theory is thinking ahead once again and investigating options to remove this constraint is in my view welcome. it is therefore a pleasure to be at this conference and i am looking forward to learning more about all the proposals presented today. j. r. hicks, 1935. “ a suggestion for simplifying the theory of money ” economica, new series, vol. 2, no. 5 ( feb., 1935 ), pp. 1 – 19 bis central bankers ’ speeches in my remarks, however, i will argue that while the effective lower bound for short - term rates exists, it does not in fact impose a binding constraint on the effectiveness of monetary policy. there are readily available tools for dealing with the lower bound constraint that at the ecb go under the name of “ non - standard monetary policy measures ”. moreover, even if structural changes in payment habits could soften the constraint on short - term policy rates imposed by the effective lower bound, i consider such ideas – in the euro area at least – to be for tomorrow and not for today. the effective lower bound is not at zero let me begin however with an important question : where is the effective lower bound in the euro area? as you know, the ecb operates on the basis of the corridor system. we have an interest rate at which we normally provide most of our liquidity to monetary and financial institutions, the rate on the main refinancing operations, or mro rate. we then have the marginal lending rate – a rate incorporating a spread over the mro at which banks can obtain overnight liquidity from our standing marginal lending facility. and we finally have the deposit rate, that is, the interest rate on the deposit facility where banks can place their reserves in excess of the reserve requirement and which is fixed at a spread below the mro rate. since our september 2014 monetary policy decisions, the mro rate has been fixed at 5 basis points, the marginal lending rate at 30 basis points, and the deposit facility

provided a substantial amount of liquidity. those incidents indicate that in an era of highly distributed risks and well diversified financial intermediation, financial institutions are involved in risk intermediation in various forms and they sometimes have to face unexpected risks once a large shock hits the market. based on that experience, financial institutions and those engaged in securitization businesses need to improve risk management practices, such as revising the valuation model of securitized products and developing an evaluation model of market liquidity risk. in addition, it seems that the " originate and distribute " type of business model still requires further improvement. second, it is important to enhance transparency when developing new financial technologies and products. in particular, when a great financial shock occurs, concern spreads over the entire market, and it is likely to provoke an excessive response. ten years ago, during the asian currency crisis, criticism was leveled at the opaqueness of hedge funds in terms of their investment strategy and scale. as for the current subprime mortgage problem, concern over the difficulty in identifying the location of risks has risen since they have been dispersed worldwide through securitization. all in all, it should be noted that risk transfer transactions such as securitization and credit derivatives have indeed the function to stabilize the financial system through diversifying risks. various innovative activities including the development of highly sophisticated financial technology should never be hindered, and the fruits of such activities should be used for the purpose of stabilizing and developing the global economy. toward that end, it is of utmost importance that financial institutions and relevant parties that endeavor to build a new market using the state - of - the - art technology revise the transaction rules and practices and disclose information on a voluntary basis. with respect to regulation and supervision, the framework needs to be designed in view of encouraging private financial institutions to create a new added value and accordingly to promote sophisticated risk management. in any case, the issue faced by japan's financial system remains to be the overconcentration of risks in the banking sector and it is still being addressed. the low profitability of the banking sector may be a reflection of such a problem, and it is important for japan's financial institutions to further hone risk management skills and enhance the value - added financial services and profitability. and while it is an ironclad rule " not to invest in the products with obscure riskiness ", it is necessary to improve the ability to assess the complex nature of risks and