##ider, what type of monetary policy implementation framework suits best for the eurosystem in the longer run. as a result of our framework review, the eurosystem will move back towards a system in which marginal liquidity is eventually supplied through short - term credit operations at a fixed rate and with full allotment procedure. hence, the new framework can be seen as a move from a supply - driven balance sheet towards a demand - driven one. in some sense, this marks a natural return towards our original thinking that led us to design a demand - driven system based on refinancing operations, and a liability driven balance sheet. we have started a journey to normalize our balance sheet, but its size will be different from what it was before the series of crises started some 15 years ago. the natural size of our balance sheet has doubled thanks to the increase in the autonomous liquidity factors. furthermore, we will continue meeting the banks'demand for reserves in full also in the future. hence, this demand will be an important driver of the overall amount of liquidity and thus also the size of the central bank balance sheet. yet, even if there 2 / 3 bis - central bankers'speeches are uncertainties in the way, our direction is clear, we will be unwinding the legacy monetary policy outright portfolios, and this process will take quite some time before we introduce new ways to provide the banks with their structural liquidity needs. as there are many uncertainties around the monetary policy implementation landscape today, we must stand ready to react and calibrate the size and composition of our balance sheet also in the future if and when monetary policy does not transmit smoothly. after all, monetary policy operational framework needs always to serve our monetary policy ultimate goals – price and financial stability needs will always dominate in our thinking about the optimal balance sheet. so, in the eurosystem, we will carefully monitor the evolution of all the relevant markets and indicators and stand ready to adjust the framework design and parameters if necessary. thank you for your attention. i am looking forward to our discussions in which we may dig deeper into the design of central bank operational frameworks. 1 one could add gold and imf receivables to the natural central bank assets, but when netted with their liability side counterparts ( revaluation accounts and imf special drawing rights ), their volume would not change the big picture. 3 / 3 bis - central bankers'speeches

regulatory tools work across the entire financial system. this strikes me as an important goal and the ultimate bis central bankers ’ speeches challenge for policymakers. the challenge arises not only from the fact that the regulatory system is fragmented, but also from the fact that, in order to work – indeed, in order to instill trust in the resiliency of the financial system – regulations need to be complied with by financial system participants and enforced by supervisors. the recent attention being paid to capital regulation, in particular, shouldn ’ t distract us from the broader context and importance of compliance with, and enforcement of, the various capital rules. from the perspective of the hammer, everything looks like a nail. similarly, from the perspective of the financial regulator, everything might look like a problem of insufficient capital. instead, capital might, in fact, be sufficient but appear insufficient because of circumvention of compliance, or because of absent or delayed enforcement. to make regulation – any financial regulation – work, there must be on - site opportunities for supervisors to look for risk factors that, if not addressed, can lead to failure. there must be strong governance that is practiced by smart management teams and overseen by informed and engaged boards of directors. loan loss provisioning must be appropriate, and regulators need to enforce such appropriate provisioning, as well as assess the prudence of the institutions ’ underwriting standards. examiners of any financial institution must be able to spot early risks and articulate to institutions ’ management and boards of directors why such risks are, in fact, risks. and the identification of risks should be true risks, and not just new business practices that examiners have never seen before. addressing risks should not be tomorrow ’ s problem ; troubled financial institutions should not be “ fixed ” by permitting larger firms to buy them without commitments to address the risks presented by the combined firms. finally, the public needs to have faith that regulation is meaningful. the public has an interest in a strong financial system, and this interest needs to be articulated when regulation is crafted, implemented, and enforced. concluding thoughts even within the regulated sector, crafting appropriate financial regulation to address asset bubbles is challenging. in reality, it is hard to know in real time when asset prices have deviated sharply from fundamentals. asset price increases often initially reflect improving fundamentals and may only subtly and gradually change into reflections of speculative excess. prior to the peak of housing prices, interest rates were low, making mortgage payments affordable ; real incomes