of the forward guidance is to stabilise our money market and it has been, in my view, pretty successful so far. we have a number of instruments that are available to stabilise the money market, for instance fixed rate full allotment. the governing council has decided that fixed rate full allotment will stay until july 2015. and fixed rate full allotment is, in my view, the most powerful instrument that we have to stabilise the money market and it is being used by market participants, meaning that the mro effectively acts as a safety valve. it is being used by market participants to stabilise liquidity. something we could do if there is a need to extend the horizon under which this liquidity backstop is available to market participants is just to extend the horizon of fixed rate full allotment. that ’ s not very spectacular but that ’ s a way to provide security to the money market in a way that is consistent with our forward guidance. that ’ s just an example. bis central bankers ’ speeches would you now be upset if we see eonia and other very short - term interest rates steadily and an in orderly fashion go to the refi rate? what matters most for me is stability in the money market rate, meaning that it is either stable around a level known to market participants or it fluctuates in a way that is known to market participants. and it will fluctuate, because we do have liquidity cycles in the euro zone. we have a maintenance period, you have autonomous factors – treasuries pumping liquidity in an out of the market etc – and these are factors well known to market participants that explain why there is a certain amount of cyclicality in both liquidity and eonia within the maintenance period. insofar as this is stable and known to market participants, i think that ’ s fine because this does not create uncertainty. another important criterion for me is that any volatility in shortterm money market conditions does not spill over to longer maturities, where they would start having an impact on lending rates to households and companies – variable rate mortgages, for instance. we are not seeing this at all. we have seen movements up and down in the front end of the money market curve but we haven ’ t seen that being transmitted to longer maturities, which explains also why i don ’ t see a reason to act now. so that ’ s about stability. we

interest rates are squeezing the margins that banks can generate from maturity transformation. together, these effects are crimping net interest income. furthermore, banks are recording stronger flows of short - term deposits, which increases their exposure to interest rate risk. ever since 2011, we have been seeing an almost steady rise in the basel interest rate coefficient, which is a measure of interest rate risk. what this means for german credit institutions is that they should actively manage and hedge their higher interest rate risk – having an adequate capital base helps as well. a major risk associated with a low - interest - rate environment materialises when that spell comes to an end. in this scenario, pre - tax net income would probably suffer a short - term slump, especially if interest rates were to climb abruptly following a long period of low rates. this would not only generate present - value losses in the short run, but might also cause interest expenses to outpace interest income in the medium term. moreover, german institutions are now carrying more risky assets in their books than they were just five years ago. not just that : they are also extending the average residual maturity in their proprietary business, which is exposing them to 3 / 5 bis central bankers'speeches more credit default and market risk. but from a long - term vantage point, an interest rate hike would help the banking sector recover and regain stability. and that ’ s precisely why it ’ s so important for the banking system to be adequately capitalised, since that would help it cushion shocks over a short to medium - term horizon. supervisors are closely monitoring german institutions in this setting. following on from our exercises in 2013 and 2015, we at the bundesbank are planning to conduct another survey on the low - interest - rate environment next year among the institutions we supervise directly – this time with added interest rate, credit and market risk stress tests. we hope this survey will give us an insight, early on, into any critical and risky developments in the banking sector and assist supervisors in their dialogue with institutions. past survey results tell us that credit institutions are responding to the new setting and pushing up their earnings from commission business – which includes, amongst others, account management and payment fees – and also increasingly passing on negative interest rates to major customers. we have also been seeing a steady flow of consolidation and mergers in the savings bank and cooperative sectors. for all the progress we have made, there ’ s still one topic that continues to worry me. roughly eight years on from the onset of