central bankers have extensively examined the relationship between public and private money. for example, in marcello de cecco ’ s book on money and the empire ( 1975 ) we read of the substantial efforts of english banks to prevent the bank of england from collecting deposits during the xix century. on the other hand, in 1999, at the jackson hole symposium held by the federal reserve bank of kansas city, discussing old and new challenges for central banks, mervyn king speculated that ( in a world of electronic transactions in real time ) without the centralisation of settlements “ central banks, in their present form, would no longer exist, nor would money ”. even more than the “ end of money ”, the consequence would have been the potential “ end of monetary policy ”, with the return to a pure exchange economy or the loss of central banks ’ monopolistic supply of base money that technology would have made possible. but the importance of a centralised system built around an outside money issued by the central bank, which preserves its value and acts as a lender of last resort, and an inside money, issued by the banking system in connection with its role of maturity transformation, has emerged forcefully during the pandemic. i would therefore like to focus on three questions. one striking feature of the pandemic crisis is that banks, thanks to the progress made after the global financial crisis, have been an important stabilisation factor. in many countries, for example, the banking system has been the vehicle through which government support measures ( such as guarantees and moratoria ) have reached households and businesses. on the other hand, some types of money - market mutual funds have experienced severe problems. they required the central bank to step in and are now under scrutiny. would similar problems have also emerged for providers of private money - like assets? even more striking has been the importance of monetary policy. not only have prompt and exceptional liquidity provisions preserved accommodative financial conditions, consequently preventing a generalised tightening of credit and averting the risk of a spiralling crisis, but also the measures enacted by central banks have allowed governments to access the financial resources needed to support households and firms without market tensions emerging. absent a monetary authority, would issuers of stable - coins have been able to maintain the stability of the financial system? and would they have been able to preserve the value of their currencies in both normal times and during a crisis? a third, fundamental, question concerns inflation.

euro area governments if certain institutional prerequisites are met. first, borrowers must adequately and promptly respond to market signals. second, transparent and timely information concerning the actions and the budgetary position of sovereign lenders should be available to all agents ( and a reform designed to improve the quality and reliability of fiscal statistics by strengthening eurostat ’ s powers has been recently adopted ). third, full bail - out of troubled governments should be credibly ruled out. a no - bail - out clause is already enshrined in the european treaties, but many investors were inclined to believe that the clause would not be applied in an emergency. this implied that, ex ante, investors did not demand sufficiently higher premia for holding government bonds with higher default risk. by contrast, if the threat of a default is credible, this will foster stricter market oversight and induce less fiscal profligacy ex ante. in equilibrium, default will be less, not more, likely. but how can a no - bail - out clause be made credible? the answer, of course, is by making, ex post, the bail - out more costly than a bail - in for official lenders ; that is, by reducing the spillover of a sovereign default so that the economic and political costs of a default fall mainly on the defaulting country. it is paramount to weaken the link between sovereign risk and bank bis central bankers ’ speeches risk. this will require a careful analysis of the many different channels through which a deterioration in fiscal conditions affects the cost and availability of bank funding. for example, regulators might want to carefully assess the ( regulatory ) incentives banks have to hold excessive amounts of risky sovereign bonds, and the collateral rules that are used by central banks and in wholesale markets could be reconsidered. the link between sovereign and bank credit ratings should also be carefully examined. rules and markets should not be seen as mutually exclusive, but as mechanisms that complement and reinforce each other. the challenge would be not only to limit the intermediary ’ s exposure to a given sovereign borrower considered in isolation, but also to guarantee that intermediaries can survive even if debt restructuring in one country triggers restructuring in others. it should also be taken into account that a default can threaten financial stability through its impact on derivative markets ( e. g. the market for credit default swaps ). all this clearly requires regular stress testing of financial intermediaries and the availability of timely and objective assessments of