the possible launch of a cbdc ( central bank digital currency ). i am looking forward to the results and the conclusions that will be drawn from them. in the euro area, we are one step ahead. we published a report on the groundwork for a digital euro in october 2020 and launched our eurosystem project eight months ago. the aim is to investigate whether we should introduce a digital euro and what it might look like. as in all the other countries the question arises, why are we doing this? if you asked the average consumer on the street, the majority would probably not see an immediate need for something called the “ digital euro ”. but would the response have been any different if steve jobs had asked whether we needed a thing called the “ iphone ” at the beginning of this century? 2 good reasons to come up with cbdc ( central bank digital currency ) as i said, central banks have different reasons to consider the introduction of cbdc ( central bank digital currency ) a worthwhile undertaking. in the euro area, we are seeing decreasing demand for physical cash which, up to now, is the only form of central bank money that is available to the general public. but cash isn ’ t suitable for payments in the digital world, like in e - commerce. therefore, it could be beneficial to additionally offer a digital version of cash to support digitalisation in the european union. let me clarify : the digital euro would complement cash, not replace it. we will stick to our current practice of market neutrality : consumers should choose their means of payment at their own discretion. some also take the view that a digital euro is not needed because other innovative means of payment like stablecoins, already exist. but the recent turmoil has clearly illustrated that not everything that glitters is gold. and even if stablecoins were properly regulated, like “ e - money ” in the european union today, there would still be issues such as the risk of fragmentation along witch a lack of interoperability and broad acceptance. issues, ladies and gentlemen, that a digital euro would, in any case, remedy from the start. moreover, there are further reasons that might be unique in europe compared with other jurisdictions. since the single market for cashless payment solutions in the euro area currently only exists for credit transfers and direct debits, both the eurosystem and the european commission see the need for a pan - european payment solution, running on european infrastructures. as of now, payment cards

effective. when northern rock got into trouble with £23bn in customer deposits and a balance sheet of £100bn, the uk financial authorities were left with no way of rapidly transferring parts of the failed bank ’ s business to another bank ; or of recapitalising the bank by imposing losses on shareholders and creditors without serious risks to financial stability. all speeches are available online at www. bankofengland. co. uk / speeches and so, on 17 september 2007, the chancellor was compelled to guarantee all northern rock deposits. subsequently the bank was nationalised to avoid insolvency and to allow the bank ’ s critical functions to continue while a buyer was found for its deposits. the lessons of northern rock were dramatically underscored a year later by the failure of rbs and lloyds. faced again with the choice of insolvency or taxpayer intervention, the government was forced to inject £37bn into the two banks. the banks were not put into insolvency and it proved impossible fully to write down the existing shareholders or impose losses on the bond holders. the first lesson from this was that constructive ambiguity simply didn ’ t work. the market had always suspected this to be the case. the implicit subsidy enjoyed by the largest banks before the crisis illustrated the market ’ s assumption that the state would always intervene to prevent their bankruptcy. and the market was generally proved right. the exception that proved the rule was the fed ’ s decision to let lehman brothers enter insolvency. the fallout globally from lehmans demonstrated dramatically, why, for large banks that perform critical functions, insolvency is not a viable option. the second lesson, which follows from the first, was that if we want, when a bank fails, to have better options than a disruptive insolvency or a taxpayer bailout, those options have to be put in place well beforehand. doing so comes at a cost to banks and to public authorities. but if at the point of failure, there are no better options than were available in 2008, moral hazard cannot be avoided. rather than constructive ambiguity, we need credible clarity that when a bank gets into trouble, the losses will be made to fall on shareholders and creditors and not the taxpayer. and if the bank provides critical services to the economy, that these can continue while the bank is resolved in an orderly way. the purple book it is in order to achieve such credible clarity, that next week the bank will publish an update