So if inflation is too low for too long – as is the risk in the euro area today – other tools become necessary. Two years ago, the Governing Council introduced several non-standard measures to unclog the transmission mechanism and avoid a credit crunch. We coined these measures “credit easing package”.
Some liquidity and capital plans that banks had been relying on proved inadequate last year; others clearly were not sufficiently developed to address the range of contingencies that banks can face in a volatile market environment. Compensation management systems also are under heightened scrutiny from regulators.