believe that regulatory policy, when part of a system of effective prudential supervision, has the potential to address asset price bubbles and their consequences. regulatory policies can lean against emerging asset bubbles and the vulnerabilities that attend them by restraining financial institutions from excessively extending credit. in addition, such policies can build resilience in the financial system, enhancing its ability to absorb and shrug off unexpected losses from any source, including sharp asset price declines. of course, monetary policy also has the power to lean against the growth of asset bubbles. while there could be situations in which monetary policy might be needed to try to limit the growth of a bubble, in my opinion such use would represent a failure of regulatory policy, which represents a more tailored response than the flattening out of aggregate demand that would likely result from contractionary monetary policy. regulatory tools some of the significant regulatory tools for addressing asset bubbles – both those in widespread use and those on the frontier of regulatory thought – are capital regulation, liquidity regulation, regulation of margins and haircuts in securities funding transactions, and restrictions on credit underwriting. without plumbing the depths of each type of tool, i ’ ll say a bis central bankers ’ speeches few words about each as it relates to the curbing of excess credit growth that fuels asset bubbles and to mitigating the effects of a bubble ’ s collapse. capital regulation capital regulation – in particular, the imposition of minimum capital requirements – increases capital and thereby improves the ability of regulated financial institutions to absorb losses and maintain lending after a bubble has burst. more capital reduces the probability of institutions ’ failure, with the added benefit of reducing the chance of funding runs due to loss of confidence. but because higher required capital also generally increases the cost of funding assets – by increasing the role of capital in the funding mix – it also raises the possibility of reducing the supply of credit from regulated institutions, making credit more expensive. thus, higher capital requirements, to some degree, also lean against excessive credit growth that can fuel asset bubbles. relevant capital regulation tools include a higher amount and quality of capital, such as is required under basel iii ; leverage ratios, particularly the supplementary leverage ratio, if regulators increase it ; the basel iii countercyclical capital buffer, which is designed to build resilience and lean against credit - fueled asset bubbles in a countercyclical manner ; and capital surcharges. supervisory stress testing and capital planning are related regulatory capital - focused tools. they

of changes in key interest rates to money market rates, and along the money market yield curve to longer maturity rates and then to retail interest rates, has become more differentiated. in addition, the market for sovereign debt, which is essential for the functioning of the interest rate channel, has become severely disrupted in a number of euro area countries. this implies that monetary policy impulses have been transmitted differently in the various euro area countries. eurosystem market operations and financial integration the eurosystem has become increasingly active in its market interventions since the outbreak of the financial crisis. this is not unusual : history shows that financial crises tend to broaden the operational boundaries and range of responsibility of central banks, as these take on a larger share of financial intermediation in the economy. in doing so, central banks perform, in a centralised way, a function that decentralised private markets are incapable of or unwilling to provide, and consequently they take on greater risks in their balance sheets. the unconventional monetary policy measures taken by the eurosystem were motivated by the pressing need to avoid disruption to the monetary policy transmission mechanism. in response to the fragmentation of interbank markets, the ecb has adopted several measures to temporarily complement impaired intermediation in the interbank market by increasing intermediation via the central bank. these non - standard measures range from the fixed - rate full allotment tender procedure to foreign currency operations and, more recently, to a temporary broadening of the collateral pool. most notably, the ecb introduced 12 - month refinancing tenders and subsequently conducted two 36 - month operations at a time when the sovereign debt crisis was hampering euro area banks ’ access to market - based funding. the exceptionally long maturity of these operations provided banks with a longer horizon for their liquidity planning, mitigating the funding pressure they were experiencing around the turn of the year. in addition, it gave them the necessary breathing space to deleverage in an orderly manner over the medium term. the evidence we have confirms that this measure was critical in avoiding disorderly asset sales and a downscaling of longer - term lending. with hindsight, the eurosystem ’ s operational framework has proven to be effective and flexible during the crisis, adjusting well to difficult conditions. however, there is a limit to what market operations alone can achieve. they can neither address the underlying causes of the bis central bankers ’ speeches deterioration nor completely offset its effects. the stability and functionality of financial