what monetary policy can and cannot do. the ecb ’ s non - standard measures in living up to these “ ten commandments ” sketched out before it is well understood that in practice central banks need to perform a balancing act when carefully assessing the costs and benefits of unconventional measures. against this background let me briefly review the main characteristics of the non - standard measures adopted by the ecb in the wake of the financial crisis. most measures are mirrored in the size and composition of the eurostem balance sheets, reflecting its role as liquidity provider of last resort in the crisis : to monetary counterparties, to markets and ultimately to the real economy. • the bulk of liquidity support has been via lending operations ( against collateral ), rather than via outright purchases. this practice is closer in line with the ecbs operational framework, limits balance sheet exposure and facilitates endogenous exit. at the same time, both modalities are in principle also part of the toolkit of traditional instruments for monetary policy operations. • with the adoption of fixed - rate full allotment in liquidity provision, lending is almost done freely against collateral to deal with impaired money markets, while quantities respond endogenously to the degree of stress in interbank markets. • extension of ltros maturities up to 1 year in 2009 and to 3 years in 2011 / 12. this lengthening of the maturities still remained broadly within the realm of short - term liquidity provision while addressing uncertainty on bank funding. • covered bond purchase programmes were limited in size and duration. they were targeted to malfunctioning markets and are important bank funding instruments. this bis central bankers ’ speeches was done with a view to act as catalyst for market activity ( notably in 2009 ) rather than replacing private market activity. • the securities market programme in place from 2009 - 2012 again aimed at specific dysfunctional government bond markets, where volatility had increased and liquidity diminished. purchases were not aimed at targeting specific yields and were fully sterilized to offset impact on the size of the eurosystem balance sheet. • the outright monetary transactions announced last september to address unwarranted tail risks, allow for ex ante unlimited interventions, but are subject to strict conditionality ( imf / eu programme ) to address concerns over moral hazard. they are also restricted to maturities up to three years. all of the ecb ’ s non - standard measures seek to balance the benefits and possible adverse side effects of what monetary policy

monetary policy needs to deal with asset price bubbles, which have often been linked to financial stability concerns. as is generally accepted, bubbles are situations in which the prices of various types of assets differ from their fundamental market values. asset price bubbles originate in the existence of imperfect information in financial markets, leading to the mispricing of assets and, in turn, to the distortion of investment and consumption decisions. often, asset price bubbles occur in an environment of regime shifts, prompted by major technological innovations, which gave rise to the belief among a broad spectrum of economic agents that a new era had started. in this respect, the impact of the “ new economy ” on stock prices that we have experienced in recent years has not been that exceptional. however, the importance of asset price bubbles and their potentially distorting impact on economic and financial processes does not mean that central banks should make asset prices an explicit goal for their monetary policies. this idea has been refuted by many, and rightfully so. asset prices are predominantly driven by real factors such as technological and demographic developments and preferences, which cannot be controlled by monetary policy. furthermore, economic agents should not be given any cause to act on the basis of expectations that central banks would insure financial markets against considerable losses. otherwise, there would be serious moral hazard problems and the public would hold the central banks accountable for specific developments in financial markets such as the performance of the stock market. this might seriously impair the central banks'goal of pursuing price stability, and thus their credibility. central banks also face considerable problems in terms of identifying financial bubbles. after all, a bubble can only be confidently identified as such once it has burst. j. e. core, w. r. guay and d. f. larcker, “ executive equity compensation and incentives : a survey ”, federal reserve bank of new york, economic policy review, april 2003, pp. 27 - 45. a. greenspan in his testimony before the committee on banking, housing, and urban affairs, u. s. senate, 16 july 2002 ; see also a. greenspan, “ stock options and related matters ”, remarks at the 2002 financial markets conference of the federal reserve bank of atlanta, 3 may 2002. p. maidment, “ in nothing we trust ”, forbes magazine, 7 january 2001 ; f. fukuyama, “ trust : the social virtues and the creation of prosperity ”, free press, 1995. f. fukuyama,