As with our monetary policy tools, we are closely monitoring the situation and we will review our approach on a regular basis. Independent of the ECB’s actions, banks need to perform proper risk management, acknowledge the recognition of impairments, and book an appropriate level of provisions. I would now like to turn briefly to the subject of central bank digital currencies (CBDCs) and how the pandemic has had an impact on them. The arguments in favour of CBDCs have intensified during the pandemic; one of them is reaffirming the role of central banks as the sole issuers of money. Although these arguments are legitimate, they do not necessarily tip the scales in favour of immediate action in favour of CBDC issuance. This is due to the many legal, operational and policy issues around CBDCs which remain unresolved, standing in the way of a transition from traditional cash to CBDCs. I have touched on those issues in some of my previous speeches. Suffice to say that the issues in question will continue to provide food for thought for the ECB, euro area NCBs and central banks throughout the world as they further explore the costs and benefits of CBDCs. Conclusion Let me conclude. In the blink of an eye, the coronavirus pandemic and the response to it placed the global economy in an induced coma. The ECB has acted forcefully and well within its mandate. Our crisis response shows that our legal framework is flexible, but only up to a certain point.
But, we will conduct purchases only to the extent this is necessary and proportionate to fulfil our mandate. In short, the PEPP is a targeted, proportionate and temporary measure in response to the crisis triggered by the COVID-19 pandemic. The legality of the PEPP is ensured for three reasons: First, and as I mentioned earlier, the PEPP falls within the ECB’s mandate in that it pursues monetary policy objectives. As in the Gauweiler case, the measures designed to preserve the monetary policy transmission mechanism may be regarded as seeking to maintain price stability. Let me add that the argument invoking the transmission mechanism cannot be used to ease credit risk premia which are due to the idiosyncratic economic and financial situation of a country. Second, in accordance with the PEPP Decision,“Purchases shall be carried out…to the extent deemed necessary and proportionate”.3 The proportionality assessment of the PEPP must be supported by economic analysis which shows that the measure: (i) is suitable for attaining the monetary policy objective in current and future environments; (ii) does not go beyond what is necessary in order to achieve this objective; and (iii) weighs up the various interests involved to prevent any disadvantages which are manifestly disproportionate to the objectives set.