I plan to structure my talk in two parts. First, I will discuss the role of central banks as liquidity providers and lenders of last resort, seeking to preserve financial stability as a necessary, albeit insufficient, condition for achieving their primary objective of price stability.
This role will in turn explain why central banks, including of course the Eurosystem and the ECB, have expanded their balance sheets during the crisis. Second, I will elaborate on risk management in central banks, explaining how this differs from risk management practices in private financial firms.