thomas jordan : seventh karl brunner distinguished lecture introduction of markus k. brunnermeier text of the seventh karl brunner distinguished lecture by mr thomas jordan, chairman of the governing board of the swiss national bank, zurich, 28 september 2023. * * * ladies and gentlemen i am very pleased to welcome you all to the seventh karl brunner distinguished lecture. we are delighted and honoured that professor markus brunnermeier has accepted our invitation to give this year's lecture. i also want to thank the eth zurich and its president joel mesot for their hospitality. the swiss national bank established this annual lecture series in honour of the swiss economist karl brunner, one of the leading monetary economists of the last century. our aim with these lectures is to reach a broad audience, and to contribute to the public debate on issues related to our mandate. markus brunnermeier is an ideal person to hold the karl brunner lecture. markus is the edwards s. sanford professor of economics at princeton university and director of the bendheim center for finance. his research is of great relevance for central banks. this includes work on systemic risk in the financial system, price bubbles in stock markets, liquidity crises, and digital currencies. in addition to being an outstanding scholar, markus is a role model when it comes to cultivating the dialogue between academia and the general public. the voices of academic economists are vital for sustaining a productive public debate on the major economic issues of our time. markus takes this responsibility very seriously. he has the rare gift of being able to reduce complex issues down to the essentials without compromising academic standards. this is one of the reasons why markus was awarded the deutsche wirtschaftsbuchpreis for his book the resilient society, as well as the ludwig - erhard - preis fur wirtschaftspublizistik for his contribution to informed public debate. it was not always obvious, however, that markus would become a world - renowned economist. growing up in landshut, bavaria, his career seemed mapped out for him : he was to take over his father's carpentry business. as we know, markus ended up taking a very different path in life. nonetheless, his observation that he has probably hammered in more nails than any other economist may well be true! be that as it may, rather than taking over the family business, markus completed his abitur

of the eurosystem was chosen with great care with a view to its smooth functioning in both normal and stressful times. it aims to steer short - term money market rates close to the main policy rate in a smooth and efficient manner, with the primary aim of implementing monetary policy decisions. it consists of some elements that are regularly employed and others that can be activated should the need arise. in particular, the framework foresees, on the one hand, regular weekly and monthly open market operations, which are the standard main channels for the flow of liquidity to the banking sector. at the same time, standing facilities are available to all counterparties at any time, meaning that banks can deposit or borrow overnight liquidity in unlimited amounts, provided that they have adequate collateral available. on the other hand, the ecb can use the tools provided by the operational framework with a high degree of flexibility, should the need arise. some of this flexibility has been employed in recent months – for instance in the occasional special provision or absorption of liquidity overnight, or, on one specific occasion, in a change in the duration of main refinancing operations. by comparison with other central banks, several features of the eurosystem ’ s framework are noteworthy. first, the outstanding volume in refinancing operations is fairly large, tending before the start of the turmoil to be around 20 times that of the federal reserve. this implies that banks need to borrow a fairly large amount from the ecb on a regular basis. moreover, because of the relatively large reserve requirements faced by eurosystem counterparties, this means that the ecb needs to intervene on a larger scale in exceptional circumstances. second, the eurosystem has a very large number of counterparties for its operations. and finally, the ecb accepts a wide range of collateral both in its open market operations and for its marginal lending facility. the design of the operational framework is closely related to the structure of the euro area capital markets. for example, the large set of eligible collateral ensures that market participants are not hampered in their participation in the eurosystem ’ s operations as a result of their country of residence. in a similar vein, the large number of counterparties in the eurosystem ’ s operations ensures that the different degrees of concentration in the banking industries of the various countries does not affect banks ’ access to liquidity. the operational framework not only reflects the structure of european capital markets ; it also influences it. again,