, other central banks had to innovate more than the ecb. the fed, for example, acquired the authority to pay interest on reserves and this placed a floor – or, more precisely, a lower grey zone of values – on the level which the fed funds rate can take on in daily overnight trading. the ecb, by contrast, entered the crisis with a corridor system and an elastic operating framework which did not need much tweaking to offset shocks. but we did shift from a competitive auction system, in which quantities are controlled by the central bank, to one in which we fix the price and take the quantities as endogenous in liquidity - providing operations. and this meant at some point that the overnight rate was left to drift down to the floor of the corridor, where it still stands. this, in turn, implies that the overnight rate has become more independent of the volume of excess liquidity. • second important development during the crisis : central banks in a large part of the world engaged in non - conventional measures aimed at absorbing liquidity risk and duration risk from the market. those central banks engaged in quantitative easing bis central bankers ’ speeches have focused on duration risk and have targeted term premia. the ecb has primarily concentrated on liquidity risk. as i said, we decided to fully accommodate banks ’ demand for liquidity in an elastic manner. we also expanded the list of eligible collateral, so that banks could more easily liquefy their balance sheets and mobilise assets that had become scarcely tradable for liquidity purposes with us. the ecb took care of duration risk ( or in our case funding risk ), indirectly, to the extent that we replaced banks ’ intermediate - maturity wholesale market borrowing with our longer - term refinancing operations. as a result, the duration risk vis - a - vis banks that markets did not want to bear migrated, to a certain extent and temporarily, to our balance sheet. • finally, the third important development during the crisis was that central banks had to substitute for the sudden disruption of interbank market activity and became de facto the “ money market intermediary ” of last – and sometimes first – resort. for the ecb this was facilitated by the broad range of counterparties accepted in monetary policy operations and its broad collateral framework. other central banks had to innovate in order to step up their intermediation role by resorting to specific targeted facilities outside their standard operating environment. modali

- 28 level has improved relative to the past. last but not least, the financial system continuously innovates, the work of regulators comes with a lag and shadow banks remain insufficiently monitored and under - regulated. further challenges arise from geopolitical risks, trade disputes or even trade wars, or cyber - risks. as central banks, we have to be prepared for all contingencies. 6. 3 policy actions needed to deepen emu central banks are expected to continue to use the asset side of their balance sheets, as well as other tools such as forward guidance, in addition to their standard interest rate policies, as the effective lower bound will likely continue to be a binding constraint on interest rate policy in a low inflation, low interest rate environment. however, monetary policy alone cannot stabilize the economy in perpetuity. fiscal policy should also be active in member states with sufficient fiscal and current account space. to address the remaining challenges and to be better prepared for a future crisis, we must also take action now in order to further deepen emu. at the moment there is no appetite for a fully - fledged political and fiscal union. however, there are important steps that we can take in order to enhance the functioning of emu. in the financial sector, it is a priority to complete the banking union by creating the european deposit insurance scheme ( edis ), and the capital markets union ( cmu ). the completion of the banking union will improve the stability of the banking sector by cutting the still strong banksovereign link. more developed and integrated capital and banking markets will improve the financing of the real economy by diversifying the sources of financing, and will facilitate private risk - sharing through the capital and credit channels. moreover, the more risk is shared through the private channel, the less fiscal risk - sharing is needed1. ηowever, we should make sure that the expansion of the non - bank sector does not endanger financial stability. the integration and connection of european financial centres in the context of the capital markets union becomes even more important in view of brexit. the emphasis on sustainable finance and, recently, on the pan - european personal pension product ( pepp ), and possibly the development of occupational pensions or investment savings accounts, may be a way forward in order to boost the demand for the cmu. however, the cross - border portability of these instruments is key to their success. besides harmonisation towards best practices in securitis