 So, welcome back everybody to the conference, and I'm Iman Hamani also, I'm the Director-General for Market Operations here at DCP, and it's my pleasure to introduce our Market Participant panel today, because one of the principles of the conference is to have this dialogue between the academic literature and market participants' view on monetary policy, implementation and money markets. So, today we're very fortunate to have four panelists that are accomplished financial market professionals and are uniquely suited to provide a 360 degree perspective on the issue of central bank operational frameworks, and we have a really good representation of different parts of the financial system. So, we have two internationally active banks, a US bank, a Euro area bank, we have a large asset manager and a hedge fund. So, with that, let me introduce briefly the panelists, starting with Seth Carpenter. So, Seth, you are the global chief economist for Morgan Stanley, and you had roles before at UBS and Roco's Capital, but before that, you had a distinguished career as a central banker, 15 years at the Federal Reserve, eventually as deputy director of the Division of Monetary Affairs, and then your transition to the US Treasury as deputy assistant secretary for macroeconomic analysis, and then assistant secretary for financial markets. Arancha, Arancha Cano, you are a portfolio manager at Wellington Asset Management, and prior to that, you also had a very rich career as portfolio manager in hedge funds, so by the Asset Management, more capital management, and before that, at UBS on the prop trading side. So, Louis Aho, you are, I think, people know you well here, you are the CV Watcher for credit agriculture, and you are renewed for your sharp monitoring of our monetary policy decisions, and your insightful and witty reports on the ramifications of these decisions on money markets. And finally, Giuseppe Marofino, Giuseppe, you are currently the Euro area rate strategist and head of research at LMR Partners hedge fund, and formerly, you worked at Barclays and Uni Credit, and your career has always been linked to money markets and research. So, let's start, and since the global financial crisis, central banks' balance sheets have changed significantly in terms of size and composition, and they reacted to two main trends that Philipp Laine outlined this morning, which is basically the fact that central banks did QE to react to below-target inflation, and they also reacted to market disruptions that were threatening the transmission of monetary policy. And at the same time, as these central bank balance sheets were expanding, other structural changes were taking place in financial markets and profoundly changing and transforming financial markets. A new regulatory regime was put in place. Banks have also, as a result, and as a result of the crisis, altered their risk attitude and their risk management. The role of non-banks has become more prominent, as a last session has shown. And finally, technology has accelerated the speed of financial transactions with possible digital runs, as we saw in March, and giving rise to financial tensions. And so overall, the experience from the pre-grade financial crisis may have become less informative. And so the first question, and let's kick off with you, Seth, is, from a macro perspective, I mean, can you elaborate on these structural change since the great financial crisis that you consider most relevant for banks, demand for reserves, and central bank frameworks? Absolutely. Thank you very much, Iman. And it is an absolute pleasure for me to be here. I remember coming to very early versions of this conference, and it's always been fantastic, and being with really smart colleagues is fantastic. So a lot has changed since the financial crisis. I think all the points that you made about regulation, about risk controls within banks, all of those on a micro level are absolutely critical to the way the market is functioning. But I think there's also a lot of reaction function from central banks, and then just general macro and market developments that have affected the way banks are acting in money markets. And one of the way that I like to talk about this is we have had a number of so-called once-in-a-lifetime events, but it feels like we've had about four or five in the past 20 years. And I don't think that is much of an exaggeration. So the financial crisis was clearly a huge event. I think the freezing of the repo market in September 2019 was a massive event that had the possibility of shaking markets globally. COVID was obviously a huge shock to the world. March 20th development in treasury markets was a big event tied to COVID for sure, but sort of its own idiosyncratic once-in-a-lifetime event, the LDI crisis in the UK. So why do I stress that part of things from a macro perspective? I think it has shaped both policy response and mentality for firms. Policy response in terms of regulation, I still think there's a move among banks to try to figure out, in financial markets overall, to understand how different regulations are going to be binding. That's not fully understood. There is the risk management by individual firms. If there's a line from regulators, you don't want to go right up to the line right away. You want to stay back from the line. But then when you overlay those considerations with the fact that we have seen these massive dislocations in markets that can mean big losses for firms or for hedge funds, potentially big opportunities that often get intermediated through dealers, I think that change in view of the world about how big the shocks could be is really important. I do worry that with these once-in-a-lifetime shocks when people do postmortems about the reaction function of central banks to these big shocks, very often you hear things like, well, we can't worry about moral hazard in the moment. We have to keep the world from stopping, turning, and it was such a big catastrophe. Moral hazard is an issue. I think it's worth testing that question because we've seen so many of these big events. So how does that matter for monetary policy operating frameworks for money markets and for reserves? I think part of it is the reaction has been, and now several times in a row, massive overwhelming size in central bank responses in terms of flooding the market with liquidity to try to prevent the worst possible outcomes. We clearly saw that in 2009, I guess, when we first started doing QE1 at the Fed. Over time, those programs, those LSAP programs actually got bigger and bigger until we got to the open-ended LSAP program, and I think that was sort of part of this evolution towards bigger and bigger size. When we got to September 2019, repo markets froze up. The Fed came in with massive purchases of Treasury bills, very, very large that I think I remember a couple of days before the intervention by the Fed. I had clients calling me and saying things are getting bad how soon before the Fed's going to come in and intervene. March 2020, we saw freezing in the Treasury market, big intervention by the Fed started a very, very large QE program that then went on for an extraordinarily long period of time, all the while arguing it was both macroeconomic policy and financial stability. And so I do think the fact that people are still grappling with the idea that we're in a world with bigger shocks, what the reaction function needs to be from policymakers, how banks should respond, I really do think we've got a skew in the reaction and that's a big part of how we ended up where we are. And I think it changes where markets are. And so the last point is between the financial crisis and sort of the first tentative lift off and definitely this last hiking cycle, everyone in markets got very, very comfortable with the idea that cash liquidity had essentially zero cost or in some cases negative cost. And business models were built around that fact. We're in a different world right now and I think that's another aspect that we need to grapple with. Thanks, thanks very much. And Arancha, Louis and Giuseppe, in one sentence if you can characterize the structural change that you would focus on. For me it's very clear, I mean banks used to absorb cycles, basically they were the shock absorbers over time because of the way they accounted for MPLs and provisions. Regulation has just made the banks extremely prosyclical. And even more prosyclical when people like me an investor will straight away understand that the other ways they can produce are going to be diminished and basically threatened if you want in a downturn of the cycle. That creates that reaction function where the banks react to those low valuations and protect themselves from capital and increased liquidity. So you should think that banks ask the instruments that would accelerate probably a downturn rather than help that downturn. Yeah, on my side I totally agree with what you both said. I think that today the bank treasurer is totally scared. I mean in 2007 his job was to make money with his cash, his liquidity. And today the only thing he thinks about is to have enough cash tomorrow whatever happens due to the once-in-a-lifetime event that that happened since 2008. And that's why you have no longer the possibility for banks to lend to someone that is not absolutely safe that is to say to lend to to the ECB basically. Yes thanks. Just a estimation that my demands today are reflecting my own view and not the funds I work for. So coming to your question in my opinion the most important change of the past year is related to the the fact that dealers bank balance sheet has become a scarce commodity. So there is a cost for using banks balance sheet and invest before the crisis didn't know that, didn't pay anything, was free. And this has enormous impact on the plumbing and the intermediation of both in the liquidity market and the cash market that makes the system much more vulnerable or sensitive to shocks. And the effort of banks over the past few years has been to make the use of the balance sheet more efficient through the use of netting or the use of CCPs. But overall I would say the prices of the central banks to provide backstop has become even more important in this context. I may just add to the plumbing point which I fully agree with. The sheer volume of sovereign paper in the market that has to be either financed or held or purchased by someone is much much much larger given the size of everyone's balance sheet. And I think that adds an extra wrinkle to the plumbing. We're trying to put more paper through the same pipes. Absolutely. So that's a nice segue also to one of the major structural change that we're going to zoom into. And that's basically the changes in banks regulation. Because it comes in various forms in your intervention but let's zoom in there and let's focus on the different ratios that have been either introduced or transformed as a result of the post-GFC, the liquidity coverage ratio, the leverage ratio and the net stable farming ratio. And clearly the way in which banks today are steering these ratios. My feeling is that this interacts in various dimensions with the way that they determine their demand for reserves. And we don't fully understand how this interaction actually works. But let's try to understand a bit better. So Arancha from your investment perspective, which of these three regulatory ratios that I mentioned or maybe another one represent the most binding constraint for demand for reserves and central bank frameworks and why? So for the market operations by far LCR is the one you should focus on. It's a ratio that hasn't matter because there's been excess reserves. But it's a ratio that we're all focusing the most above all because of the final repayment of TLTRO. I mean the LCR ratio, most treasurers and my colleagues probably will comment on that. There's two ways to address that ratio. It's either the numerator or the denominator. The first starting point is that when you ask treasurers where do you think your LCR is going to go post TLTRO, there is no agreement. There are people who think 120% is the right number. People who think it's 130%, 140%. So that creates a lot of instability in the market because if there is no agreement, what is a good safe ratio? By definition, banks will create buffers and buffers. So if you have to manage your LCR, so you repay your TLTRO, the collateral that comes back is probably the least good collateral because the rest is already back. So you have two things. Either you beat up for funding and then the better banks have basically the possibility to issue cover bonds. But remember, in the Eurozone, banks balance sheet have been contracted for the last 10 years. So now everyone has available collateral to basically create cover bonds. Problem number one. The second thing is if you say, well, I manage my denominator, you can do two things. You can beat up for the highest quality liabilities. So that means paying up for deposits or basically you can't reduce the balance sheet of the bank. That means contraction in the economy. So when you think as a central bank, what is the reaction function of banks, you need to consider both. The first one that I said, paying up for high quality liabilities, so payroll accounts, will change the deposit bidder models. And for that, you need to think about financial instability because if the banks model wrongly their deposit bidders, it will have an implication. The second one is contraction to the economy because the banks will say it's no worth while to keep on paying for funding. Therefore, it pays me off to lend less to the economy. Yeah, absolutely. And this question I think of deposit bidders for the denominator is extremely important. So Giuseppe, from your window in the quote-unquote fast money community, how do you see financial regulation affecting banks' demand for reserves? I totally agree with Rancho. Liquidity coverage is the most important requirement for banks in terms of demand for reserves. We need also to consider that in addition to LCR, we have the internal, regular internal model liquidity money for banks that many times are stricter than LCR. And then also demand for reserves of eligible collateral for the intraday payment system. Time banks need reserve collateral to collateralize their intraday volume or lending in the target to payment. So, but let's focus on LCR because in my opinion what's happening in March is very important. We can have several lessons from that. The first one is the importance of the liquidity regulation. The US regional banks didn't have a liquidity requirement. So the liquidity one is important to inject the discipline in the banks how to manage the liquidity buffer. But at the same time, Credit Suisse with a very good liquidity ratio had a problem because this means that the ratio has some weakness, I would say. And first of all, we talk about the 30 days stress period. In reality it's one day stress period. Bank run could start overnight or during the weekend and the queue in front of the branch is just the last part of the bank run. So at this that means that we need to look at what our banks measure the estimate the net outflow. So the denominator. Retail deposits, they have a very low or zero bank runoff rate. But deposits from young people are different from deposits from, I would say, old people. The former are much less stable than the latter, maybe more similar to many market fund deposits. But we need to consider the amount of non-operational liquidity, non-insured deposits, or the amount of deposits in different currencies. The currency breakdown of the liquidity operation. So many, many aspects that before nobody considered, but now we need to consider. And I think banks have started already to pay a lot of attention to that. They want also to show to the market that they are cautious. So when they calculate the net outflow, probably they apply stricter runoff rate. And they want to have an HQLA much larger than the denominator. And HQLA, the numerator, this is very important because this gives us an indication of the demand for reserves. The model was very interesting chart in the Philippe Lane presentation. It showed that the ratio between HQLA reserves over HQLA. It was 50% in April 2020, basically before the, we say the big increase in the, in the banner sheet that was on the pandemic. And now it's 70%. So what will be the optimal ratio? I ran just say that nobody answered this question. No, but I was thinking, you know, what I was saying, one thing I should warn you about, I'm good at warning people around in the audience. So watch out. You know, I mean, say what happened in Belgium the other day, you know, it's like they miscalculated how much money they could get basically from retail in a, in a retail offering. So the offering from the Belgian government was equivalent to a 7% outflow of deposit in one day. When you calculate LCR is a 5% deposit outflow in a month. So if you're a bank treasurer, you need to think, what if you have external shocks of this type? I mean, obviously you're going to run buffers on buffers. So that is why they don't have a number they want to run by. And also another important point, reserves and the government bonds are both a level one asset, the best asset for HRA. But they are not the perfect substitute. This is very important. Banks prefer reserves. First of all, it's a safe asset. It's a central bank. It's a good remuneration. They report it. Government bonds occur, even the safest are bonds or treasury. They are, basically, they suffer the market volatility. Banks have also some cost, the cost of aging and also remember the margin as part of the calculator, the denominator. And what you, in case of stress, need to go to the market to repo the treasurer or to sell them. But even selling is not easy because the accounting could create a problem. It's at the HTM. You need to go to the central banks. It's a repo operation. Central banks is fine theoretically, but I'm not sure that investor and market is happy to see the narrow usage increased by 100 billion in one week. So we need to consider, for this reason, probably banks have a skewer towards having more reserves than bonds. And the denominator, the liquidity conversion now at 3 trillion, let's assume we have 130% liquidity conversion, the numerator will be 3.9 trillion. 50% reserves means about 2 trillion at least of reserves that banks could request in the new norm, I would say. So it's incredible to pick it. Before the great financial crisis, we had no liquidity ratio at all. Now we're saying the liquidity ratio we have is not conservative enough and you can have stress scenarios that are much more severe than in this ratio. So I don't know where we stop on that. But maybe to wrap up on this regulation point, Louis or Seth would like to add anything there, regulation? Yeah, not just a quick point. Obviously not a regulation expert, but what is interesting is that I had the feeling between, say, 2016 and 2019 that the ratio that mattered, especially maybe for my bank, that's why, but was the NSFR ratio because banks... So net stable funding. Net stable funding ratio, indeed, because banks needed term funding and that was the complicated part, apparently, to fund, especially from the market due to the fact that insurer and asset manager were reluctant to fund banks on term funding and that's why probably the ECB, the Euro System implemented TLTRO2 and more importantly the first part of TLTRO3 that were clearly to support banks NSFR. What we have to say currently is that despite the repayment of TLTRO and the shortening of their maturity, most of them are no longer eligible to NSFR, banks have achieved to fill their NSFR ratio with difficulty and no, indeed, I totally agree with my two co-panelists. The focus is clearly on liquidity coverage ratio and the worry in banks is more on that point. I think the only extra thing I would add sitting through some of the earlier panels, I remember trying to come up with models, theoretical models of demand for reserves and how that would act with supply and what is it that drives a bank's demand for reserves. I think the regulatory side of the thing is clearly important. Two of our panelists said LCR clearly important, third said NSFR is very important. Iman, you mentioned at the beginning the leverage ratio. I think the fact that there are different sets of requirements that could be binding for different banks at any point in time or different regulations could be binding for the same bank at different points in time, I think therein lies for me, one of the very, very challenging aspects of trying to model any of these in very simple, tractable, continuously differentiable models. Absolutely. Let's now transition to another profound change of the past 15 years and that's the changes in market functioning and market structures. The functioning of money markets in particular is key for central bank operational frameworks and they are the main channel for redistributing liquidity across the banking system and also between banks and non-banks. And these markets have also experienced really structural changes since the financial crisis. I'll only mention two and I'm sure you will have many others to mention in the discussion. The first one is a move towards more secured funding markets as the prime channel for redistributing liquidity. So repo markets in focus here while activity in the unsecured interbank market has remained very muted, very marginal since the crisis. And the second transformational change is the increasing role of CCP central counterparties and in particular in money markets in relation also to basically regulation, I mean other streams of post-crisis regulatory reform and lastly of course the role of non-banks in the money markets. So Louis, when you look at money markets today, how do you see all these changes playing out? So when you think that and that's an important question for us as central bankers when we look at our operational frameworks, do you think that the interbank market can recover as excess liquidity is reduced? Would there be a sufficient set of incentives there for banks to start trading again in the interbank market with each other? How do you see that playing out? Yeah, I would say no. I don't think that the interbank market can revive at some point in time. I mean today what I said at the beginning is that I have the feeling that the bank treasury is totally scared and it's way too scared to lend to another bank that this part also on the fact that the regulation makes very costly for a French bank for example to lend overnight unsecured to an Italian bank. So it will be extremely costly I think for it's too risky for banks to lend to another in unsecured. So that's why I think that we will struggle to see a revival of the unsecured bank packet. That's the first point. The second point is that indeed there's still uncertainty because currently there's no need for an unsecured interbank market because almost no banks need overnight liquidity currently by the simple fact that we are still largely in excess liquidity even in the weakest jurisdiction. So there's no need for the interbank market currently. Now the question is whether we will see again a revival of the unsecured interbank market. I think that we have a natural experiment when the ECB implemented the tiering in October 2019 when the ECB implemented the tiering in October 2019 it made that the Italian banks were short of liquidity Italian banks as a jurisdiction were short of liquidity to fill the tiered facility and so they had to borrow cash overnight to someone else and so and what happened is that they did not borrow to other banks they increased their rate of borrowing toward money markets and so the interbank market did not revive due to this need of lending across banks but it went through non-bank actors especially money market fund. So my answer would be that I don't expect the interbank unsecured market to revive but I think that there's a way to contour this situation via a non-bank actor namely money market fund especially. Yeah and clearly also last session showed that you know the importance of non-banks the role they play in relation to banks is an important dimension. So Giuseppe how do you assess the functioning of the different segments of money markets today? So the first of all let me say I totally agree with the interbank unsecured market is that is very likely to recover soon also because it is a regulatory important aspect to consider the lending overnight to run a bank as a RWA cost so the rate if applied would be very very high much higher than a deposit on the other side borrowing unsecured as a 100% runoff rate for liquidity conversion so much better and this is working very well unsecured interbank secured market so repo between banks this very especially if versus high quality collateral so government bonds that has a runoff rate for the liquidity conversion very very low and this is working very well banks are lending each other in the repo market and also lending between banks and non-banks banks are using a lot of netting both via ccp or asking in exchange for specific bonds special bonds tb for example so you have a bonds security versus securities so this does not absorb banashit remember what we said in the beginning you know there is now banashit is a scarce commodity and this is of course a favor a lot of the intermediation what we have seen on the this since the beginning of this year had over the payment of tier zero many banks especially italian banks had done a long-term repo 12 months repo for example using the btps or other bonds they use as collateral and so this is a sign that markets are functioning but a long-term repo is good also for less stable fund duration and that important segment so and indeed ccps are very important role in this context because they favor netting so the dealers that can net repo reverse repo transaction is very save a lot of banashit they also allow them to apply good conditions to the trade in terms of haircut and rate applied to the to the repo transaction in my opinion important segment that has to be developed is the unsecured market secure market in the world sales money market so commercial paper which is basically between banks and non-banks already we see in the beginning here we have seen an increase in the cp volume many banks started to issue six months 12 months to replace the tier zero and the outstanding has increased and this is important because there is no absorption of collateral so part of the banks can get funding without the locking locking part of the asset side so this is very important and also provide reduce any potential scarcity pressure in the repo market of course we need to work a lot on the cp market because it's still some fragmentation among countries we have the french cp market italian cp market german cp market european commercial paper market its own rules on legal aspect there was a lot of development especially in france with no cp program or step program by the cp that favor a lot but we needed to work more to have also in the secondary market to have a more efficient secondary market that allow many investors especially money market to invest so overall in usher money market is doing well especially secure market unfortunately interbank market and secure interbank market is unlikely to recover soon no absolutely i mean and just to come back then you mentioned uh that uh ccp's were important central clearing and i think this is you know in europe we are i think quite fortunate to have a well functioning um cleared repo market yeah i mean the percentage of transactions that are cleared central cleared for repo is very high yeah it's around the 70 to 80 percent in the u.s it's still a live conversation you know how do you you know put central clearing into the picture uh for repo markets and government bond markets yeah yeah and and i mean continuing the conversation about um adaptation in in market structure and and market functioning i really cannot um resist questioning a little bit the the prayer the premise that you all um i think gave so far which is you know there's no going back to the pre uh gfc world okay because you know it's easy to say that but to some extent banks will have to adapt to basically lower reserves yeah and so i have the feeling that today we have in mind again the you know this uh way of thinking about um hysteresis for banks that banks you know have been used to such large amounts of excess liquidity uh that basically uh they will not be able uh to adapt to a different uh regime yeah uh but said i mean in your view how stronger in fact these hysteresis effects because you you started uh saying well they will have you know to to to do things differently than before you said also maybe central banks have created expectations that now they have to you know skate back a little bit and so how could a smooth um without hysteresis transition uh towards an environment with lower reserves uh but still sufficient reserves be engineered absolutely so uh hysteresis is a great word and so i think one of the challenges this is like the econometric challenge of trying to estimate whether a process has a unit root to it or just has a very long memory process and i think in practice there's not a lot of difference when we're talking about sort of things that are going on in markets over the course of a few months to to a couple of quarters uh and by that what i mean is we heard uh irancha and i think just epi talking about how banks are reacting to current circumstances by not just meeting the regulations but having buffers on top of buffers on top of buffers liquidity plans risk management is absolutely categorically a very important topic everywhere in financial markets uh so important in fact that a liquidity plan how the asset side of the balance sheet is structured is not something that is just done simply by the treasurer of the bank and then forgotten is discussed by the treasurer who then talks to the cfo who then talks to the ceo and they jointly talk to the board those sorts of plans are very challenging to change at a dime and so when i think about you know a theoretical version of how this might work you would see spread start to open up uh and then there'd be a no arbitrage condition that would happen and as if the spread got to be more than a couple of basis points the banks going to step in and take advantage of that it's just not the way the world is going to work anytime soon and so what you would have to see potentially is a very large spread that opens up and not just for a day or for a weekend but for months and months and months and perhaps quarters at a time to the point where someone on a treasurer desk can write a memo to the treasurer that says if we change what we're doing we can pick up 15 basis points and it looks like we'll have the same ultimate return and the the treasurer will look at that and go well you know around november is when bonuses are determined so let's come back to this topic early next year just in case something goes wrong right and then eventually it'll get socialized all the way up and so is that a permanent shift in things is that truly hysteresis or is it just a very very long-lived process i'm not sure i know exactly the difference i suspect that if we saw large market deviations for a long enough period of time you would get a change in banks funding plans and banks liquidity plans but it would have to be big and would have to be persistent we often look at the spreads and go wow you know you had 15 basis points 20 basis points isn't that a lot you know hedge funds will often chase 15 or 20 basis points in a in a various trade but for money markets yeah we have to remember at least in the u.s the convention is to take whatever that spread is and then you divide it by 360 and then you think about what portion of that might go into your own comp at the end of the year and then ask yourself am i certain 100 percent certain that's going to be right against the possibility that my career is now over uh because i took the wrong decision and i think therein lies some of the real life frictions here and why some of these spreads can be large and extraordinarily persistent yeah aren't you know i think you're right i think there is a lot of inertia of you know just protecting yourself especially i mean banks face people like me you know it's like when you trade at four and five times book value your only hope is to become so safe that you create enough buffers that you can convince me you're a safe bank and therefore you know eventually the valuation will work you know but there is a lot of self-protection that as i said it takes time basically to work it out you know i don't think the treasures are going to change their reaction function very easily yeah and it's about this asymmetry yeah that basically the spread uh exploiting the spread it doesn't get you very much but if you get it wrong then the consequences are much more severe yeah i mean you could see what happened in february with the event of the u.s banks basically the regional banks when you see the performance of the different sub sectors in europe it was the weakest link that got impacted more you know the share prices of the banks that have the lowest operating profits the lowest roe are the ones that get impacted the most so guess what the treasuries of those banks were doing just hovering liquidity basically yeah absolutely yeah so a transition that is likely to take some time and and require as you said also changes in mindset changes potentially in governance and a bit more flexibility in the governance of banks than than we have today yeah so i mean another change of the past 15 years of course was the extensive use of large-scale asset purchases and longer-term landing operations and these have been really additions from dcb perspective but also other center banks to to the center bank toolkit that have really transformed this toolkit yeah and and now we're entering a different a different phase yeah i mean as you mentioned a lot around shuttle heroes are being um largely repaid purchase programs have started or are well-entrained to to run off and so um i think a fair question is how could the role of these instruments so asset purchases on one side longer-term landing operations on the other side be adjusted to a new steady state yeah and and philly plane said a little bit about you know this this morning with this idea of a hybrid you know system where you combine asset purchases longer-term landing operations and the short-term landing operations and so um if we start with you aren't you i mean starting from your perspective you have the euro area which is a bank-based economy and so how do you expect basically banks need for central bank operations in in the future yeah so what could be for example the attractiveness for banks of longer-term landing operations if they are not subsidized like they were for TL heroes during the pandemic and how do you see also asset purchases being part of not QE but more of providing reserves for banks yeah i think i think landing operations is a lot easier because basically as i said there's a lot of externalities that are going to impact you know liquidity for the banks i mentioned what happened in belgium or italy and we can discuss obviously minimum reserve requirements you know i mean all those changes are crowding out basically profitability of the banks you know it's a tax on the system you know and how they react to did is going to be different where the lending operations come from is like if you have a facility that first of all is you know seen as known as stigma that will help a lot the first problem that we have is any facility that he has a superior cost so too high cost too short tenor and too strict collateral it's basically seen as stigma and basically only banks that really really need that funding because they cannot get it anywhere else will come to use that facility now the minute that any of us knows that those banks are using that facility is the minute those banks lose the credibility so it's a it's a virtual circle it's like what kind of parameters do you fix in the facility so that you know like very strong banks and weaker banks all use the facility now of course you know the the christmas list of the treasurers is a facility like the you know the btfp in the us you know which is unpolyquity tenor you know no haircuts you know as i said i mean i said to them that was the christmas list you know you write 20 things and you get three but you know but i mean you should try to think about something that has the least stigma possible you know and i think that would be the most valuable thing for for the system you know to engage into more routine you know operations with the central bank to be part of the funding basically which i don't think the mRO is today no i guess on purchases they used to be very relevant in the past because they avoided fragmentation but that was when there was a very strong linkage between the sovereign basically and the banks through the alco portfolios i mean as we said you know reserve the 70 percent of the hqla so the banks are not going to go and buy a lot of you know sovereign bonds basically but you know it will help the face the system i just think the the lending facilities far more powerful basically yeah and coming back i mean on the stigma you're right that you know the the good combination between as you said the terms the material of the operation the collateral the pricing all of this all of this matters and it's not easy to to to calibrate exactly to get it right i mean another another dimension is of course how bank supervisors will look at you know the recourse or can in my view what would be persistent recourse to to central bank operations yeah and this is also an adaptation that needs to take place because in certain cases the stigma can also come from the way that supervisors look at that yeah rather than markets absolutely to that last point i think there are three representative agents who have to be convinced that it's perfectly fine if you want to get rid of stigma you need the supervisor you need the cfo and you need a rancher otherwise okay i am the toughest one you will have a rancher's numbers on this point in any it's very interesting that bank of inga they say clearly that this is no stigma associated to the users rather lending facility in the new or the new world so for example this is an important indication of that that contributed to reduce the stigma maybe just on this point the stigma the thing is that if you ensure that there's no stigma going to the operation that means that you are probably marginally too accommodative because if you want banks like for example a big french bank to go to the refinancing operation it has to be relatively accommodative because this is the kind of bank data the large assets to the to the market so indeed that's the issue but that's obviously the issue you will face in the in the future reviewing your your monetary framework is how to adapt the monetary framework without having an impact on monetary stance and that's probably the issue with the stigma and obviously the question will be by test and trial what we know is that the first modalities of tl-3 were not enough accommodative not accommodative enough because i think that at the september 2019 there was three three three billion euros of borrowing so not accommodative enough clearly it's clear that the last modalities of tl-3 were too accommodative we can account that too we agree on that even if it's on my christmas this best absolutely but i mean louis the other dimension of these different instruments is that they distribute liquidity differently in the financial system yeah so basically uh when the center bank conducts asset purchases it doesn't give rise to the same you know flows across banks and then non-banks then when you do lending operations where you you learn directly to banks and so how do you see also the role of these two different instruments from this perspective of redistribution of liquidity across the financial system yeah i think that i will join arancia saying that again tl-tero but i think you know that i am a huge fan of tl-tero but i think that tl-tero are more efficient if you compare the the qe purchase program versus the long term of financial operation purchase program inject overnight liquidity whereas tl-tero our long term of financial operation inject term funding for banks so it's way more easy it's way easier for banks to get long term of financial operation from zcb so that you have term funding you have no issue of net stable funding ratio and so it's the first part is more efficient than the simple qe simple purchase program of course i know that purchase program remove duration from the market so banks can more easily issue cover bond or whatever it is so it's kind of counter the the the fact that it's not as efficient at tl-tero but still on this point of view tl-tero are more efficient banks need term funding but have term funding from zcb directly the second point indeed is that qe is a passive way of injecting liquidity you buy stuff and then the liquidity goes to asset manager to money market fund and then they go to banks but this means that naturally the liquidity will go to the safest banks and if you look at the distribution of liquidity by jurisdiction after the qe it's clear that the liquidity of the qe went first and for most to germany france and netherland on the contrary tl-tero are a proactive way of bank to ask for money depending on the way they fund them elsewhere by cover bond or whatever and by their need for liquidity and this is what you can see with especially the borrowing at tl-tero tree is that tl-tero tree have increased mostly liquidity in italy spain and portugal where the bank needed the most because this is where the credit impulse was the most needed so that's why tl-tero are a more efficient way to provide liquidity at the right time also at the right place all the more if we are in a system that stays in the financial fragmentation more or less i mean we are in a better situation that we are in 2012 obviously but still there's still this shadow financial fragmentation and the tl-tero are the best way to overcome this this financial fragmentation obvious here again what we just discussed earlier to calibrate the tl-tero to be accommodative enough for banks to go without stigma but not too accommodative otherwise you have an impact on your monetary stance that's an issue that we'll have to be discussed and the other question also is how to manage the collateral framework to ensure that it is as efficient to accompany the new framework of reference to the patient i think the collateral we didn't mention the collateral framework that's especially because i mean as i said when you look at the balance sheet of the banks in the euro area we haven't grown i mean for 10 years we've been contracted balance sheet you know this is the question i asked to philly lame because the the only expansion of the loans that we had in the last three years is because they were government you know guarantees attached to those loans but credit creation hasn't naturally happened over the last 10 years for a lot of reasons most of it is regulation but also because you know the economy wasn't growing so so there's a combination of the two but it's important to remember because if the collateral framework is too narrow banks have not generated collateral so by by nature you're going to exclude certain banks that have not been able to generate that collateral so that's something important to consider what kind of collateral framework you can you can apply basically no i agree this is a crucial point in opinion the new operational framework dcb was introduced scarce reserve or hybrid reserve which means agri usage of the ecb liquidity operations without eligible collateral of course banks do not have do not have access but when it's in for me what is important the collateral framework i think dcb should reduce the dependence on market volatility it up with the securities with the market security like a government bonds and also the depends on the assessment from rating agencies so having a collateral framework based on for example on in house create assessment by central banks we know that the ICAS main central banks in the euro system have very developed made a lot of progress in the sense in the assessment of loans provide credit claims provided by banks this is very important because banks would have a large part of their illiquid assets like loans eligible for ecb operations and this would be a sort of buffer of eligible collateral that can be used in case of stress and potentially could lead banks to reduce the amount of reserves because if i know that i can use my loans to the ecb correct yeah to for an emergency borrowing basically i can i can be a bit slightly more relaxed on on on the reserves and at the moment we are still benefiting from the easy collateral measures during the pandemic on the acc on additional credit claims most of them are still with the government guarantee so for the season the value in terms of borrowing capacity is still high what will happen from march 2024 when these measures will end so it's important now to consider at least part of this measure to can be continued just to maintain this a sizable amount of this collateral eligible for a cb borrowing and don't get me wrong banks would like to run on lower lcrs you know it's not that they are dreaming on having very high lcrs the problem is they cannot get away with the fear you know of having a shock and being with a lower buffer i think that if it results knows that banks are using in liquid collateral for borrowing probably this reduce a bit the stigma i don't know yes that's possible because it's probably something that is positive for the prohibitability of the bank because you reduce the cost as a support yeah and i think it also goes to this idea that you want to be able to provide reserves elastically in case of stress okay so if you know that your collateral framework is broad enough to accommodate this kind of you know increasing the size of liquidity facilities in times of stress this is obviously comfort element for the market ex ante yeah i would say of course you have another situation or possibility which is just to broaden your collateral eligibility when you have stress yeah and uh and that's another way to do it but but it's intermittently in my but for it to be a substitute i'll just get back to the point that was made earlier for those facilities to be a substitute for ex ante holding buffers of cash yes there has to be no stigma or there has to be the belief that it's going to be worthwhile doing it and that involves those three people i was talking about the supervisor the cfo and arancia no pressure that's great so we're coming to the end of the panel but before we close i wanted to ask one last provocative question to you which is actually inspired by an article that louis you you you wrote so you're the culprit here and so you you actually had a piece about how to maricondo the operational framework so how to simplify the operational framework to its essential elements and so my challenge for you today is in one minute for every one of you how would you go about mariconding the operational framework and maybe we start with the inventor of the of the quote so you louis yeah i think my paper was totally non-conclusive it was a 25 paper uh but uh no my my answer my simple answer is just get rid of all asset purchase program i mean it's not it doesn't bring joy as maricondo would say so it doesn't bring joy though it has to get out so you don't use any more purchase program except for financial stability and you replace them by refinancing operation very long term refinancing operation whatever it is with okay a right calibration with the duration of the operation and the rate i would say said three years at say deposit best and or something like that and adapting depending on bank's need for for liquidity quite radical okay for me one important one thing i think get to that to get rid of is the three months in my opinion make no sense in three months three months operation it's similar to the one week if you want to have a because it's not good for the unstable financial ratio as the same value for the critical ratio as the memory as there's no impact on the in terms of runoff why it is much more important to have a long-term refinancing operation maybe more than one year or six between six months and one year they still have some unstable funding ratio and what i would keep absolutely is the full allotment even in the world of scarce reserve not come back to an auction system full allotment important because the market is sure that there will be no liquidity shock no liquidity crisis banks can can tap the ECB without any problem provide that they have of course a digital collateral yeah so you satisfy fully the needs it's like for example they work very well there's what the dollar swap line facility for many weeks there was no usage but the fact that the swap line is there market is a it's a it's a confidence that there will be no shock in the dollar market yeah so provide confidence by commitment commitment the confidence in the market which is crucial especially period of stress yeah i think at least in the design process i would probably get rid of the obsession or infatuation that i think lots of folks in the central banking world have with the design process for uttering complete control of short-term interest rates where you get you know at most one basis point of variation from one day to the next i think that kind of extraordinary focus is unnecessary i did some work with a former colleague from the fed years ago about volatility and overnight rates and how far out the curve it transmits and the answer is maybe six months out the curve not something and so in terms of doing the macro policy implementation that a central bank really cares about for full employment or inflationary control that kind of variation i think is not as important and so one could spend enormous energy ringing out the last little bit of volatility in overnight markets without necessarily achieving much in the way of benefit yeah that rings a bell from the pre-crisis period for some of us exactly well i'm not a markets person so but i would say my christmas list is be simple be predictable don't move me the goalpost please you know because then i don't know where to stand and yes financial operation with some tenor full allotment and not extremely penal cost is basically what it needs for me to know that in stress scenarios the backup is there you know because otherwise i will always barbell the banks you know the high quality ones the one that has very high operating profits highway and i will always be worried by the tail basically absolutely no thanks a lot so now we're going to turn to the audience both virtually and also here in the room for questions and we have approximately 13 minutes for questions we have ample time to take i would say at least three questions yes there's one over there i thank you um thanks to the panelists and to maybe you want to introduce siril manna from the university of burn so thanks to the panelists uh was very interesting i have one question in my mind which is related to cbdc so the uh ecb might go forward with the digital euro and i was wondering what would bring joy to bank treasurers not that one clearly i don't have it for years but tomorrow we have a nice session on that so i'm looking forward to this and i really could be inside talking to that no in my opinion depends a lot very quick answer depends of course this there is a risk that this could create some shift of deposits from retail to the central bank i think the central banks are fully aware of this of this aspect and i'm sure that we take the consideration in the design of the operation on how to put in some limits to the amount of cdbc that can be account or or provide some instrumented banks to replace this is that so i'm going to wait tomorrow maybe to have more color on that more color on that absolutely yeah there's one over there yeah thank you for a very interesting panel i'm shadan from reserve bank of india so when you talk about risk management philosophy so there we have known knowns which is basically are that all that rw and everything then we have known unknowns which you know after financial crisis we have dealt it to that how fat the tail is and everything and all that but the reason i'm asking this because we have covered how exactly that banks are being over cautious and set has pointed out that right now we are operating in the realm of unknown unknowns the crisis that we used to have once in a lifetime it's happening every one or two years practically so if we talk about risk management philosophy of the bank what exactly is the path head for them how exactly they can opt or to survive in this environment obviously one thing which you have touched upon is that the final backstop of a central bank but as we know there is obviously moral hazard and other complication with that so i just want to know your thoughts on exactly that the kind of world that it is becoming how exactly can bank top to survive without being you know overly cautious that's all thank you wow which is also a question about you know this kind of balance between banks self-insurance okay and then the insurance is provided by central banks yeah i think that's right i mean i'm willing to say that banks are cautious i don't know if they're overly cautious that's sort of a judgment for lots of people who do things other than write economics research papers but i think the the crux to the my answer to the question is it's going to take time it's an evolutionary process when i think about people making investments or i think about risk officers at banks they're looking at inflows they're looking at outflows they're trying to think about correlations across variables but you've got a sample period and one thing that i tell general macro investors when they're trying to think about correlations of assets and where they could go is extend your sample period beyond the past 25 years i think we're the topics we're talking about are ones where the relevant period is really a fairly short period of time and the only way to get a longer sample period is to just wait and see what happens and i think therein lies a big part of the the caution uh from from risk managers is they don't know what they don't know and they're trying to learn as they're going i mean you've seen it on deposit bidders you know and how people think about modeling those bidders you know i mean as iman said you know digital banks digital connectivity means the models that you had in the past probably are not perfect you know are basically going to be outdated so by definition you're going to need to think that you know as we saw in the us there was a rate at which basically banks didn't pay up for deposits and guess what happened there is a shock into the system and suddenly you know the deposit bidder is incrementally close to 80 90 percent so for those reasons first of all the accuracy of the data models so you're going to need to request from the banks to know better their customer basis which is very important and whoever fails on that is going to be systemic for a risk you know but i think that's the first premise know your customer base and segment your customer base as as much as you can so that you can predict better you know the future because if you're just using the old models you're probably going to get it wrong basically very quick in my i think that the banks will maintain a cautious approach less risk tolerance and they will continue and this in my opinion i see implication on the market functioning because in a period of stress they will further reduce the presence in the market in the intermediation just because they don't want to take a risk from them from the market and so the implication we need to watch banks but also the role of banks in the financial markets in terms of intermediation roles but it is also a bit paradoxical that if every bank remains very cautious when faced with a shock okay collectively this may actually be a problem nobody is willing to step in and kind of you know arbitrage and make markets in these conditions they will be always a bank i mean we saw it in the us you know jp morgan always will step for a spread you know for a spread there is one that always goes there you know but again you need more than just jp more than one so so yes we have to be prepared for that i would say you know and and you know there's enough institutions in europe that are okay you know so but they need to have this full comfort zone that if they step in you know like they did in covet you know it's not everything bad you know in covet there's like you know the group of strong banks that came in to learn to to be in the market you know so so i don't think it's all terrible basically yeah but covet was was easy quote-unquote because that was a symmetric shock absolutely you know you had this kind of market wide all the market was affected and and basically this is why you had this reaction yeah i think you can have you know in other situations like we've seen with credit sues and the aftermath you can have things that you know seem idiosyncratic is much more difficult uh in my view to put back on track yeah the other thing is i think we participants you know central banks investors we need to do a better effort to explain the to to all the stakeholders what is the connectivity of the different actions you know and by that for example i'm just thinking the you know idiosyncratic sort of taxes that they put on banks you know in different countries so you know all these factors affect the reaction function you know of the system so i guess it is our job also to try to explain you know the connectivity of events you know just to prevent kind of that situation where we all freak out and then there is there is no one stepping in to help the system just if i may have on the on the question of bank being overly cautious i think that we are in a in a industry that favors the fact to be overly cautious i mean we have a competitive advantage as a bank if we are overly cautious because we fund yourself at better condition and consequently we are able to provide loans or liquidity at better condition so it's also i mean it's not only the fact that we are scared we i mean as a banker we are scared by potential uncertainties it's also because being a very safe bank it's better to do a daily business and so that will be in my view even more the case in the future as due to the reduction of long-term financing operation and the reduction of overall liquidity in the system we'll have more competition within the eurozone banking system i mean the competition is more less dead with tl2 and now we are back with the repentment of tl3 we are back to competition in terms of funding and consequently in terms of ability to provide a good price to to our customers so you there's also this incentive for bank to be overly overly cautious i'm looking if we have other questions yes on the being cautious issue i mean you can be cautious by hoarding liquidity by thinking of safer loans or other parts of your balance sheet you can also be cautious by building up your equity capital and we haven't talked about that but maybe you want to say something on on that being a stronger more solvent institution that can withstand shocks and maybe even sort of sort of being a recipient of people not of weaker banks yeah i can talk about that i mean it's been a race for the i mean sometimes it makes me laugh in regulation because they say well this is a temporary higher requirement buffer but you know the buffer is there to be you know run down in time of stress i never said that you know whenever there's a capital requirement is there to stay you know i mean it's never run down so i agree with you we investors perceive higher capital ratios as a reason you know of safetyness you know basically strength you know now if you have too much excess equity your returns are lower and that's when we demand share by backs we demand part of that capital to be retained so so it's it's a fine line between running with your optimal capital which doesn't allow you to redistribute properly investors to running with too much excess capital that you don't distribute because then you dilute your returns you know and i think the banks have gone much better on that and i think the regulator andrea is done again a fantastic job on that so that's why it probably has come out less in the conversation than liquidity absolutely there's a question online from Ravi Venda will market participants rationally choose to write more tail risk as a result of central bank full allotment facilities at non penalized rates uh won't that increase systemic risk in the long run i don't think that the full allotment is an incentive for banks to take more risk because they have a lwa for example correct he's a miss a strong constraint for banks not to take you see non not necessary risk i would say so full allotment i see full allotment just as a backstop you inject the confidence in the market there will be no liquidity problem also full allotment is a nice world but if you don't have a reachable collateral you can borrow and you don't want to show to the market that you are borrowing one trillion at the demaro yes in the sense that there are basically full allotment is there but there are many other aspects that the banks will consider so to be honest i don't see any strong relationship between full allotment and risk great so specifically full allotment to those systemic risks probably not i did say earlier that so before september 19th i remembered like the thursday before i had clients seeing what was going on in financial markets and then called me and said so how much more stress does it take before the fed steps in to intervene so maybe the connection is not with full allotment per se but i do believe there is there is still some moral hazard that exists with the amount of with the the types of interventions that we've seen maybe if i want to add one point for example tier three during the pandemic is a great example because banks had the opportunity to borrow at very generous conditions so using easy collateral measures a full allotment but they did increase the risk also because a large part of the loans so they provide the war where we the government guaranteed as we discussed before so this is a sample that banks are cautious on taking risk when yeah but what what said is said is in true i was just thinking to myself basically what happened with the regional banks you know i mean the system was relatively safe with the large ones and on top of that they were gaining the deposits from the regional banks now you know the fed came with a very very generous you know solution for making sure the regional banks are there so i guess the market participants i don't know if the question was coming that way is how to calibrate you know not only the timing but the extent of how far do you want to reach you know um do you want to you know just just bail out everyone do you want to basically you know create some moral hazards so that you know wrong in you know wrong ways of working in the market get addressed and and i think it's that calibration which is important that's challenge yeah okay we sense yes we're there or the facility and then yeah there's one over there risk is the big message of this panel has been the very risky behavior of banks to or very risk averse behavior very cautious behavior of banks towards risk can i ask you to elaborate though on a distinction and a margin there was liquidity risk and there was credit risk when it comes to liquidity risk i understand why you call on the central bank to essentially satisfy the desire for caution by eliminating it after all that is a job of the central bank when it comes to credit risk though i don't want the central bank to hold any credit risk at all if the banks are overly risky risk averse then i want a non-bank sector to emerge take on that risk and that's where the substitution should happen in between the market the two kinds of risk have been a little mixed up in the panel naturally as part of the discussion and i worry that some of your proposals for getting your liquidity risk is dumping credit risk on the central bank and i worry that the non-bank sector hasn't been mentioned at all which should be the valve for the risk aversion excessive or not of banks to for that risk the channel somewhat in which we somewhat don't see in europe so could you make that distinction and they'll cross those two margins that's an excellent question because in the u.s the bank channel is what 20 30 percent of the total system the regulation is narrowed down the scope of the things that the bank can do that all the credit excess and this good credit excess and bad credit excess is basically in the non-bank channel now question mark on the transmission mechanism or things like you know rates basically i mean see how long it's taking you know for things to show up in the economy in europe banks are 70 percent of the credit transformation so until you create a second system you know which is the non-bank channel what you're going to have is the cycles are going to be very short so so why the the pass through of interest rates in in the euro area has created very quickly you know those effects in the economy because it's the bank channel is is the majority of the credit creation so but are you right we need to develop a second system that can channel the excess credit that the banks today cannot have i mean the banks today is very clear they can only lend to very healthy households and corporates and the minute that this healthy castle households and corporates potentially turn less good they start tightening because it's it's just hit the ratios very quickly i think one other part that's sort of funny about money markets is secured versus unsecured markets and in secured markets there are lots of different ways of managing different types of risk so you could have the the rate that the that the loan is made the repo is made you've got the haircut on it which also limits credit risk and then on top of that in money markets you have line limits and all three happen simultaneously which makes in my one of the reasons why i've always thought the repo market was a more interesting market than just about any market in the world because it's over identified from from to use econometric speak different frequent you know different ones of those three margins get adjusted with different frequency but i think you've got all of those and the challenge though is the line limit part of it is really important in general profitability of lending and money secured money markets is pretty low and so the first reaction since you're not making that much margin is to pull back and overall lending regardless of whether it's liquidity risk or credit risk very often those sorts of decisions at the trading desk level or to find a distinction we have one question over there many things very interesting i'm following up a bit on your question i wanted to ask i mean when you think about the operational framework how you want to reframe it it's not a starting point thinking about also now we have a big transformation we have climate risk we have geopolitical risk the whole economy is changing is it best finance this transformation we are the capital market or we are the banks and that in a way will also frame to some extent yeah what you do you need a long-term refinancing cooperation or can you come up with something different so i think the starting point must be in all of that a bit more the transformation we are going through i haven't heard much today maybe um yeah i heard something no yeah i think that we have decided proactively to set aside the financial stability part uh of the monetary of the that's not monetary policy that's financial stability so indeed i mean we have not discussed the the question of purchase program as financial stability and i see then philippine talks this morning about the fact that the ppp was very specific because it was both a monetary policy framework injecting liquidity monetary policy easing removing duration and also financial stability compressing spread so that's indeed something we have uh we have not discussed at all i think that it could be and that that's my my provocative view on the fact that the cb should get rid of purchase program because the fact that purchase program merge three different aspects makes that they are often less efficient in my view than refinancing cooperation and so indeed i'm totally uh supporting the fact that the cb should remain the uh should continue fighting financial uh uh fragmentation so we definitely need potential purchase program to ensure that you don't have too much sovereign spread because we all know that is an impact on the monetary policy and on the monetary framework so clearly we need uh to have the most powerful institution in the european union to remain here to ensure that the tail risk the world is facing will not uh will not have an impact on the way this monetary policy is transmitted so i mean i totally agree with you on that and also implicitly that the other tail risk we're facing is the fact that the the i mean the came a change we have not discussed that either but that's also a point that will have to be taken into account the new monetary framework and probably the new collateral framework so that's also part but indeed we have focused more on on the monetary framework and that's why we have said that that aside regarding the need for banks for term funding i mean it's not necessarily an absolute need because we can make yourself the transformation it's just that you have you have in my view stronger impact by lending over the the long term and you i mean if you want banks to borrow overnight at dcb you have to make a rate that is very favorable probably below the deposit below the deposit rate otherwise you have a stigma impact if you want to provide banks to a rate that is not too low you have to provide them term funding otherwise they will not be interested in coming borrowing and that's the point about the fact that each bank will not come and borrow liquidity so you have a decrease of liquidity and consequently the system as a whole will be weakened by the fact that whole banks will not be interested by by borrowing so you have to make borrowing to dcb interesting enough and so as you don't play too much with the rate even as a deposit rate i'm sure that you would have a lot of bonds that would borrow you have to play with the with the duration in measure of proportion yes just to add a few comments on that we need to consider that all the changes we mentioned the beginning on the time occurred over the past 10 years is important now the concept of liquidity of funding for banks has changed it's not any more overnight funding or short term funding as it was before the crisis now it's a long term funding and if this ends a long term financial liquid operation i mentioned before was it was important because this is now the real value of liquidity is a long term liquidity banks could support the lending also if they have a long term liquidity if you are sure that they can have a stable long term non-stable funding and which is also important in a stable funding ratio that is now is not under focus because it's not the immediate liquidity it's but it's important for banks to have a stable funding and in that we have a collateral framework to to make more close to banks to the lending because if you can bring your loans to the central banks basically you have an incentive to to lend to the economy as was the case during during the during the during the covid and also there are many other aspects that we need to consider related to the banks balance sheet the usage of bank balance sheet and this is important to know the risk tolerance that has to be considered banks have to adapt to this new environment no thank you thank you very much but i think it's true that you know the changes in financial intermediation in the financing needs of the economy is something also that is having an impact on the way we think about our operations yeah and a range of operations so thanks a lot to all my panelists i think we have gathered a wealth of very valuable insights throughout our discussion frankly and it remains clear that you know designing and maintaining central bank operational frameworks is a very daunting and challenging task especially now and that in my view i mean some degree of of trial and an error will likely be needed you know as we adapt to to the new normal and well i mean needless to say i think it's very important to have you so basically banks markets investors because you will also have to adapt to this new normal and i think it's this adaptation which happens on both sides on the side of the central bank adapting its its framework its toolkit and your adaptation that will make the thing successful yeah so thanks a lot thank you all very much and yeah i think this closes um today's uh discussions and thanks very much also for attending