Presentatie Jacques Pijl - Mediafacts Nationale Uitgeefdag 2014
Basic concepts of Eurosystem´s Operational Monetary Policy Framework and Experiences with the...
Transcript of Basic concepts of Eurosystem´s Operational Monetary Policy Framework and Experiences with the...
Basic concepts of Basic concepts of
Eurosystem´s Operational Eurosystem´s Operational
Monetary Policy Framework Monetary Policy Framework
and Experiences with the operational and Experiences with the operational frameworkframework
Hans PijlHans Pijl
Division Financial Markets Division Financial Markets
Department Treasury and MonitoringDepartment Treasury and Monitoring
Basic concepts of Basic concepts of
Eurosystem´s Operational Eurosystem´s Operational
Monetary Policy Framework Monetary Policy Framework
and Experiences with the operational and Experiences with the operational frameworkframework
Hans PijlHans Pijl
Division Financial Markets Division Financial Markets
Department Treasury and MonitoringDepartment Treasury and Monitoring
Basic concepts of Basic concepts of
Eurosystem´s Operational Eurosystem´s Operational
Monetary Policy Framework Monetary Policy Framework
Basic concepts of Basic concepts of
Eurosystem´s Operational Eurosystem´s Operational
Monetary Policy Framework Monetary Policy Framework
Monetary policy strategy:Monetary policy strategy: Why central banks?Why central banks? What targets have central banks?What targets have central banks? Why to fight inflation?Why to fight inflation?
Monetary policy implementation:Monetary policy implementation: How to implement these strategies?How to implement these strategies? Role and functions of official interest rates?Role and functions of official interest rates? How can a central bank generate stable interest How can a central bank generate stable interest rate movements?rate movements?
Monetary policy strategy:Monetary policy strategy: Why central banks?Why central banks? What targets have central banks?What targets have central banks? Why to fight inflation?Why to fight inflation?
Monetary policy implementation:Monetary policy implementation: How to implement these strategies?How to implement these strategies? Role and functions of official interest rates?Role and functions of official interest rates? How can a central bank generate stable interest How can a central bank generate stable interest rate movements?rate movements?
Monetary policy strategy:Monetary policy strategy:
The monetary strategy determines which money
market interest rate level is required to maintain
price stability.
Monetary policy implementation:Monetary policy implementation:
The operational framework determines how to
achieve this interest rate level using the available
monetary instruments.
Transmission of monetary policy Transmission of monetary policy and instrumentsand instruments
Instruments → Operational Target → Intermediate target → Policy objective
Official interest rates year-on-yearMonetarye aggregrates increase
Reverse requirements M3 Harmonised Index Euro area money market of Consumer Pirces (HICP)
Open markt operations interes rate Other financial, reel close to 2% (EONIA rate) and nominal indictors for euro area
Standing Facilities over the medium term
Exchange rate
Functions of the operational framework
Eurosystem sets and stabilises interest rates inthe short term money market in two ways:
Signalling its monetary policy stance to the money market
Managing the liquidity situation in the money market
How to set (money market) interest rates?How to set (money market) interest rates?
Step 1: determine official interest ratesStep 1: determine official interest rates
Step 2: make banks dependent on credit by the ECBStep 2: make banks dependent on credit by the ECB
Step 3: extend credit to banks with the appropriateStep 3: extend credit to banks with the appropriate interest rateinterest rate
Step 4: design framework to stabilise very Step 4: design framework to stabilise very short-term interest ratesshort-term interest rates
How to set (money market) interest rates?How to set (money market) interest rates?
Step 1: determine official interest ratesStep 1: determine official interest rates
Step 2: make banks dependent on credit by the ECBStep 2: make banks dependent on credit by the ECB
Step 3: extend credit to banks with the appropriateStep 3: extend credit to banks with the appropriate interest rateinterest rate
Step 4: design framework to stabilise very Step 4: design framework to stabilise very short-term interest ratesshort-term interest rates
Main monetary policy instruments:Main monetary policy instruments:
Minimum reserve requirementsMinimum reserve requirements Credit extension to banks viaCredit extension to banks via
Open Market OperationsOpen Market Operations Main refinancing operationsMain refinancing operations Long-term refinancing operationsLong-term refinancing operations Fine-tuning operations Fine-tuning operations Structural operations Structural operations
Standing facilitiesStanding facilities Marginal lending facilityMarginal lending facility Deposit facilityDeposit facility
Main monetary policy instruments:Main monetary policy instruments:
Minimum reserve requirementsMinimum reserve requirements Credit extension to banks viaCredit extension to banks via
Open Market OperationsOpen Market Operations Main refinancing operationsMain refinancing operations Long-term refinancing operationsLong-term refinancing operations Fine-tuning operations Fine-tuning operations Structural operations Structural operations
Standing facilitiesStanding facilities Marginal lending facilityMarginal lending facility Deposit facilityDeposit facility
Minimum reserve requirements:Minimum reserve requirements:
During a reserve maintenance period banks have During a reserve maintenance period banks have on average to maintain a certain percentage of on average to maintain a certain percentage of certain banks’ balance sheet items (2%) on an certain banks’ balance sheet items (2%) on an account at the central banksaccount at the central banks
Create / increase money market shortage Create / increase money market shortage (counterparties vis a vis Eurosystem)(counterparties vis a vis Eurosystem)
Averaging feature helps stabilising overnight andAveraging feature helps stabilising overnight and intraday money market ratesintraday money market rates
Minimum reserve requirements:Minimum reserve requirements:
During a reserve maintenance period banks have During a reserve maintenance period banks have on average to maintain a certain percentage of on average to maintain a certain percentage of certain banks’ balance sheet items (2%) on an certain banks’ balance sheet items (2%) on an account at the central banksaccount at the central banks
Create / increase money market shortage Create / increase money market shortage (counterparties vis a vis Eurosystem)(counterparties vis a vis Eurosystem)
Averaging feature helps stabilising overnight andAveraging feature helps stabilising overnight and intraday money market ratesintraday money market rates
Minimum reserve requirements:Minimum reserve requirements:
Interest paid over required reservesInterest paid over required reserves
Excess reserves not remunerated, giving incentive Excess reserves not remunerated, giving incentive to go to the market to go to the market
Penalty in case of non-compliancePenalty in case of non-compliance
Banks with large payment flows prefer large Banks with large payment flows prefer large reserve requirementsreserve requirements
Minimum reserve requirements:Minimum reserve requirements:
Interest paid over required reservesInterest paid over required reserves
Excess reserves not remunerated, giving incentive Excess reserves not remunerated, giving incentive to go to the market to go to the market
Penalty in case of non-compliancePenalty in case of non-compliance
Banks with large payment flows prefer large Banks with large payment flows prefer large reserve requirementsreserve requirements
Open marktoperations:Open marktoperations:
Main refinancing operations (MROs)Main refinancing operations (MROs)about 70% of total credit extensionabout 70% of total credit extension
Long term refinancing transactions (LTROs)Long term refinancing transactions (LTROs)about 30% of total credit extensionabout 30% of total credit extension
Fine-tuning operations (FTOs) Fine-tuning operations (FTOs) nowadays last day of the reserve maintenance nowadays last day of the reserve maintenance
periodperiodStructural operations Structural operations
Open marktoperations:Open marktoperations:
Main refinancing operations (MROs)Main refinancing operations (MROs)about 70% of total credit extensionabout 70% of total credit extension
Long term refinancing transactions (LTROs)Long term refinancing transactions (LTROs)about 30% of total credit extensionabout 30% of total credit extension
Fine-tuning operations (FTOs) Fine-tuning operations (FTOs) nowadays last day of the reserve maintenance nowadays last day of the reserve maintenance
periodperiodStructural operations Structural operations
Main refinancing operations (MROs):Main refinancing operations (MROs):
Liquidity providingLiquidity providing
Conducted on a weekly basisConducted on a weekly basis
One week maturity One week maturity
Reverse transactionsReverse transactions
Main refinancing operations (MROs):Main refinancing operations (MROs):
Liquidity providingLiquidity providing
Conducted on a weekly basisConducted on a weekly basis
One week maturity One week maturity
Reverse transactionsReverse transactions
Main refinancing operations (MROs):Main refinancing operations (MROs):
Open for all banks with a minimum reserve Open for all banks with a minimum reserve requirement (cf US system of primary dealers)requirement (cf US system of primary dealers)
Interest rate on MROs is main ECB interest rateInterest rate on MROs is main ECB interest rate
Main source credit extension EurosystemMain source credit extension Eurosystem
Variable rate tender (opposite to fixed rate tender)Variable rate tender (opposite to fixed rate tender)
Marginal rate few base points above min. bidrateMarginal rate few base points above min. bidrate
Main refinancing operations (MROs):Main refinancing operations (MROs):
Open for all banks with a minimum reserve Open for all banks with a minimum reserve requirement (cf US system of primary dealers)requirement (cf US system of primary dealers)
Interest rate on MROs is main ECB interest rateInterest rate on MROs is main ECB interest rate
Main source credit extension EurosystemMain source credit extension Eurosystem
Variable rate tender (opposite to fixed rate tender)Variable rate tender (opposite to fixed rate tender)
Marginal rate few base points above min. bidrateMarginal rate few base points above min. bidrate
Long term refinancing transactions Long term refinancing transactions (LTROs):(LTROs):
Liquidity providingLiquidity providing
Monthly auction via variable rate tenderMonthly auction via variable rate tender
Three month maturity Three month maturity
Long term refinancing transactions Long term refinancing transactions (LTROs):(LTROs):
Liquidity providingLiquidity providing
Monthly auction via variable rate tenderMonthly auction via variable rate tender
Three month maturity Three month maturity
Long term refinancing transactions Long term refinancing transactions (LTROs):(LTROs):
Reverse transactionsReverse transactions
Pre-announced 50 billion euro size eachPre-announced 50 billion euro size each
Particularly designed for smaller banksParticularly designed for smaller banks
Amount allotted is sufficient to balance supply Amount allotted is sufficient to balance supply and demandand demand
Long term refinancing transactions Long term refinancing transactions (LTROs):(LTROs):
Reverse transactionsReverse transactions
Pre-announced 50 billion euro size eachPre-announced 50 billion euro size each
Particularly designed for smaller banksParticularly designed for smaller banks
Amount allotted is sufficient to balance supply Amount allotted is sufficient to balance supply and demandand demand
Fine-tuning operations (FTOs):Fine-tuning operations (FTOs):
Smooth out effects on interest rates of unexpectedSmooth out effects on interest rates of unexpectedliquidity fluctuationsliquidity fluctuations
Liquidity providing or liquidity absorbingLiquidity providing or liquidity absorbing
Ad hoc basis and regular basis i.e. last day of a Ad hoc basis and regular basis i.e. last day of a reserve maintenance period reserve maintenance period
Fine-tuning operations (FTOs):Fine-tuning operations (FTOs):
Smooth out effects on interest rates of unexpectedSmooth out effects on interest rates of unexpectedliquidity fluctuationsliquidity fluctuations
Liquidity providing or liquidity absorbingLiquidity providing or liquidity absorbing
Ad hoc basis and regular basis i.e. last day of a Ad hoc basis and regular basis i.e. last day of a reserve maintenance period reserve maintenance period
Fine-tuning operations (FTOs):Fine-tuning operations (FTOs):
Short-term basisShort-term basis
Tender or bilateral operationTender or bilateral operation
Selected group of fine-tuning counterpartiesSelected group of fine-tuning counterparties
Fine-tuning operations (FTOs):Fine-tuning operations (FTOs):
Short-term basisShort-term basis
Tender or bilateral operationTender or bilateral operation
Selected group of fine-tuning counterpartiesSelected group of fine-tuning counterparties
Structural operations:Structural operations:
Liquidity-providing or liquidity-absorbing
Conducted on an ad hoc basis (never used yet)
Maturity not standardised
Tender or bilateral operations
Structural operations:Structural operations:
Liquidity-providing or liquidity-absorbing
Conducted on an ad hoc basis (never used yet)
Maturity not standardised
Tender or bilateral operations
Types of open market operations:Types of open market operations:
Reverse transactions
Outright transactions
Foreign exchange swaps
Collection of fixed-term deposits
Issuance of ECB debt certificates
Types of open market operations:Types of open market operations:
Reverse transactions
Outright transactions
Foreign exchange swaps
Collection of fixed-term deposits
Issuance of ECB debt certificates
Stabilizing money market interest Stabilizing money market interest rates:rates:
Fine-tuning instrumentsFine-tuning instruments
Averaging facility on the reserve requirementsAveraging facility on the reserve requirements
Standing facilities Standing facilities
Stabilizing money market interest Stabilizing money market interest rates:rates:
Fine-tuning instrumentsFine-tuning instruments
Averaging facility on the reserve requirementsAveraging facility on the reserve requirements
Standing facilities Standing facilities
Standing facilities :Standing facilities :
Deposit facilityDeposit facility overnight liquidity absorptionovernight liquidity absorption at relatively low (official) interest at relatively low (official) interest raterate floor for market ratesfloor for market rates normally no restrictionsnormally no restrictions
Marginal lending facilityMarginal lending facilityovernight liquidity provisionovernight liquidity provision
at relatively high (official) interest at relatively high (official) interest raterate ceiling for market ratesceiling for market rates normally no restrictions except normally no restrictions except collateralcollateral
Standing facilities :Standing facilities :
Deposit facilityDeposit facility overnight liquidity absorptionovernight liquidity absorption at relatively low (official) interest at relatively low (official) interest raterate floor for market ratesfloor for market rates normally no restrictionsnormally no restrictions
Marginal lending facilityMarginal lending facilityovernight liquidity provisionovernight liquidity provision
at relatively high (official) interest at relatively high (official) interest raterate ceiling for market ratesceiling for market rates normally no restrictions except normally no restrictions except collateralcollateral
Standing facilities :Standing facilities :
General:General:Providing / absorbing liquidity at the discretion of Providing / absorbing liquidity at the discretion of banks/at the initiative of counterpartiesbanks/at the initiative of counterparties
Limiting maximum interest volatilityLimiting maximum interest volatility
Signal general stance of monetary policySignal general stance of monetary policy
Standing facilities :Standing facilities :
General:General:Providing / absorbing liquidity at the discretion of Providing / absorbing liquidity at the discretion of banks/at the initiative of counterpartiesbanks/at the initiative of counterparties
Limiting maximum interest volatilityLimiting maximum interest volatility
Signal general stance of monetary policySignal general stance of monetary policy
Standing facilities :Standing facilities :Usage only at the end of the maintenance periodonly at the end of the maintenance periodOccasionally large resource on deposit facility Occasionally large resource on deposit facility duedueto securities settlementto securities settlement
Standing facilities :Standing facilities :Usage only at the end of the maintenance periodonly at the end of the maintenance periodOccasionally large resource on deposit facility Occasionally large resource on deposit facility duedueto securities settlementto securities settlement
Liquiditeitsmanagement Eurosysteem:Liquiditeitsmanagement Eurosysteem:Liquiditeitsmanagement Eurosysteem:Liquiditeitsmanagement Eurosysteem:
Demand- Reserve requirements - Excess reserves- Autonomous factors factors (net)
- deposit facility
Supply– Open market operations
- MROs (policy rate)- LTROs- Fine tuning- Structural operations
– marginal lending facility
Liquiditeitsmanagement Eurosysteem:Liquiditeitsmanagement Eurosysteem:Liquiditeitsmanagement Eurosysteem:Liquiditeitsmanagement Eurosysteem:
Demand- Reserve requirements - Excess reserves- Autonomous factors factors (net)
- deposit facility
Supply– Open market operations
- MROs (policy rate)- LTROs- Fine tuning- Structural operations
– marginal lending facility
=
(over a reserve
maintenance period)
When is implementation succesfull?When is implementation succesfull?Stable and small spread between minimum bid rate Stable and small spread between minimum bid rate and EONIA rateand EONIA rate
When is implementation succesfull?When is implementation succesfull?Stable and small spread between minimum bid rate Stable and small spread between minimum bid rate and EONIA rateand EONIA rate
1
2
3
4
5
jan-06 feb-06 mrt-06 apr-06 mei-06 jun-06 jul-06 sep-06 okt-06 nov-06 dec-06 jan-07 feb-07
Minimum bidrate ECB EONIA Index Deposit rate Marginal rate
Graph 2 Official interest rates ECB and EONIA-rate
Source: Bloomberg.
-0,50
-0,40
-0,30
-0,20
-0,10
0,00
0,10
0,20
0,30
0,40
0,50
jan-06 feb-06 mrt-06 apr-06 mei-06 jun-06 jul-06 sep-06 okt-06 nov-06 dec-06 jan-07 feb-07
Graph 3 Spread minimum bid rate ECB and EONIA-rate
Source: Bloomberg.
Central Bank Balance Sheet:Central Bank Balance Sheet:Central Bank Balance Sheet:Central Bank Balance Sheet:Figure 1 Simplified Eurosystem Balance Sheet, February 2007, EUR billions
Autonomous factors Autonomous factors
Net foreign assets (A1+A2+A3-L7-L8-L9) 321,8 Banknotes in circulation (L1) 604,4Net assets denominated in euro´s (A4-L6+A7+A11.2) 266,5 Government Deposits (L5.1) 35,8
Other autonomous factors (net) * 180,7
Reserve requirements (L2.1) 183,9
Monetary Policy Instruments Monetary Policy Instruments
Main Refinancing Operation (A5.1) 286,5 Deposit Facility (L2.2) 0,0Longer Term Refinancing Operation (A5.2) 130,0
Marginal lending facility (A5.5) 0.0
1004,8 1004,8
Source: ECB Liquidity Management Data and own calculations.
Figures in brackets refer to relevant balance sheet item Balance sheet identity: Ca = OMO + ML - DF - AF* (A5.6+A6+A8+A10+A11.1+A11.3+A11.4-L2.5-L3-L5.2-L10-L12-L13-L14-L15)
Principles:Principles:
Operational efficiencyOperational efficiencyOpen market economy / hands-off approachOpen market economy / hands-off approachEqual treatment of counterpartiesEqual treatment of counterparties
Decentralisation op implementation, simplicity, Decentralisation op implementation, simplicity, transparency, continuity, safety and cost efficiency transparency, continuity, safety and cost efficiency
Principles:Principles:
Operational efficiencyOperational efficiencyOpen market economy / hands-off approachOpen market economy / hands-off approachEqual treatment of counterpartiesEqual treatment of counterparties
Decentralisation op implementation, simplicity, Decentralisation op implementation, simplicity, transparency, continuity, safety and cost efficiency transparency, continuity, safety and cost efficiency
Experiences with the operational Experiences with the operational frameworkframework
Experiences with the operational Experiences with the operational frameworkframework
Issues:Issues:I.I. Modification of Operational Framework in Modification of Operational Framework in
March 2004March 2004
II.II. Transparency of allotment policyTransparency of allotment policy
III.III. Volatility Treasury DepositVolatility Treasury Deposit
IV.IV. End of period fine-tuning operationsEnd of period fine-tuning operations
V.V. EONIA SwapsEONIA Swaps
VI.VI. Optimal size and composition open market Optimal size and composition open market operationsoperations
VII.VII.Future challenges Future challenges
Issues:Issues:I.I. Modification of Operational Framework in Modification of Operational Framework in
March 2004March 2004
II.II. Transparency of allotment policyTransparency of allotment policy
III.III. Volatility Treasury DepositVolatility Treasury Deposit
IV.IV. End of period fine-tuning operationsEnd of period fine-tuning operations
V.V. EONIA SwapsEONIA Swaps
VI.VI. Optimal size and composition open market Optimal size and composition open market operationsoperations
VII.VII.Future challenges Future challenges
I Modification of Operational I Modification of Operational Framework in March Framework in March
20042004
Several problems encountered Interest rate changes during a maintenance
period
Underbidding in tenders, because of interest rate expectations and overlapping tenders
‘Weekend’ problem in minimum reserves and use of standing facilities
I Modification of Operational I Modification of Operational Framework in March Framework in March
20042004
Several problems encountered Interest rate changes during a maintenance
period
Underbidding in tenders, because of interest rate expectations and overlapping tenders
‘Weekend’ problem in minimum reserves and use of standing facilities
I Modification of Operational I Modification of Operational Framework in March Framework in March
20042004
Solution:
Changing maintenance period from ‘Monetary
Council meeting’ to the next Monetary council.
Shortening the duration of the MRO’s to one
week
I Modification of Operational I Modification of Operational Framework in March Framework in March
20042004
Solution:
Changing maintenance period from ‘Monetary
Council meeting’ to the next Monetary council.
Shortening the duration of the MRO’s to one
week
II Transparency of allotment policyII Transparency of allotment policy
Till March 2004: only publication of forecast for autonomous factors Sometimes wrong interpretation of allotment by
the market New information about autonomous factors andexcess reserves by daily update ECB LM figures From March 2004: publication of Benchmarkallotment, before and after allotment Nowadays frontloading (more than benchmarkallotment) as lubricant to buffer micro-economicfrictions in the money market.
II Transparency of allotment policyII Transparency of allotment policy
Till March 2004: only publication of forecast for autonomous factors Sometimes wrong interpretation of allotment by
the market New information about autonomous factors andexcess reserves by daily update ECB LM figures From March 2004: publication of Benchmarkallotment, before and after allotment Nowadays frontloading (more than benchmarkallotment) as lubricant to buffer micro-economicfrictions in the money market.
III Volatility Treasury DepositIII Volatility Treasury Deposit
Large swings in treasury deposits hampered
efficient liquidity management by ECB
Measures to limit volatility
Remuneration
Arrangements (Italy)
III Volatility Treasury DepositIII Volatility Treasury Deposit
Large swings in treasury deposits hampered
efficient liquidity management by ECB
Measures to limit volatility
Remuneration
Arrangements (Italy)
IV End of period fine-tuningIV End of period fine-tuning operationsoperations
In new framework accumulation of autonomousIn new framework accumulation of autonomous
factors forecasts more pressing factors forecasts more pressing Nowadays standard end-of-period FTO Nowadays standard end-of-period FTO Liquidity providing operations are more popular Liquidity providing operations are more popular
than liquidity absorbing operationsthan liquidity absorbing operations Reason: timing of operation, interest rate Reason: timing of operation, interest rate
operation, different specification operation, different specification
IV End of period fine-tuningIV End of period fine-tuning operationsoperations
In new framework accumulation of autonomousIn new framework accumulation of autonomous
factors forecasts more pressing factors forecasts more pressing Nowadays standard end-of-period FTO Nowadays standard end-of-period FTO Liquidity providing operations are more popular Liquidity providing operations are more popular
than liquidity absorbing operationsthan liquidity absorbing operations Reason: timing of operation, interest rate Reason: timing of operation, interest rate
operation, different specification operation, different specification
V EONIA SwapsV EONIA Swaps
Interest rate swaps from 1 week to 12 months
used for: hedging interest rate risk (transform fixed
debt into variable or reverse)arbitrage
taking positions on the curve
EONIA swap market is a very large market Sometimes spill-overs on operational target/Cashmarket
V EONIA SwapsV EONIA Swaps
Interest rate swaps from 1 week to 12 months
used for: hedging interest rate risk (transform fixed
debt into variable or reverse)arbitrage
taking positions on the curve
EONIA swap market is a very large market Sometimes spill-overs on operational target/Cashmarket
EONIA swap hedge example (1)
Credit to customer for 12 months at 3.5% Does not want to fund for 12 months, but want to
hedge interest rate risk Solution: a 12 months EONIA (payer)swap at
2.26% pay the fix (2.26%) and receive the floating
(EONIA) fund daily in the overnight market and pay the
EONIA (or less) Difference is calculated daily (compounding) and
settled at the end of the period
EONIA swap hedge example (1)
Credit to customer for 12 months at 3.5% Does not want to fund for 12 months, but want to
hedge interest rate risk Solution: a 12 months EONIA (payer)swap at
2.26% pay the fix (2.26%) and receive the floating
(EONIA) fund daily in the overnight market and pay the
EONIA (or less) Difference is calculated daily (compounding) and
settled at the end of the period
EONIA swap hedge example (2)
Issue 12 month paper to cover deficit Does not want the 12 month interest rate
exposure So conclude a 12 months EONIA (receiver)swap
at 2.24% receive the fix (2.24%) and pay EONIA
EONIA swap hedge example (2)
Issue 12 month paper to cover deficit Does not want the 12 month interest rate
exposure So conclude a 12 months EONIA (receiver)swap
at 2.24% receive the fix (2.24%) and pay EONIA
VI. Optimal size and composition openVI. Optimal size and composition open
market operationsmarket operations
VI. Optimal size and composition openVI. Optimal size and composition open
market operationsmarket operationsFigure 1 Simplified Eurosystem Balance Sheet, Figures in normal letters: February 2007, figures in brackets: June 2000, all figures in EUR billions
Autonomous factors Autonomous factors
Net foreign assets (A1+A2+A3-L7-L8-L9) 321,8 (378) Banknotes in circulation (L1) 604,4 (353)Net assets denominated in euro´s (A4-L6+A7+A11.2) 266,5 (92) Government Deposits (L5.1) 35,8 (42)
Other autonomous factors (net) * 180,7 (155,6)
Reserve requirements (L2.1) 183,9 (113,4)
Monetary Policy Instruments Monetary Policy Instruments
Main Refinancing Operation (A5.1) 286,5 (134) Deposit Facility (L2.2) 0,0 (0)Longer Term Refinancing Operation (A5.2) 130,0 (60)
Marginal lending facility (A5.5) 0.0 (0)
1004,8 (664) 1004,8 (664)
Source: ECB Liquidity Management Data and own calculations.
Figures in brackets refer to relevant balance sheet item Balance sheet identity: Ca = OMO + ML - DF - AF* (A5.6+A6+A8+A10+A11.1+A11.3+A11.4-L2.5-L3-L5.2-L10-L12-L13-L14-L15)
VI. Optimal size and composition openVI. Optimal size and composition openmarket operationsmarket operations
Implications for monetary policy Implications for monetary policy implementation?implementation?
Not convinced that current situation requiresNot convinced that current situation requires substantial changessubstantial changes Substantial reduction of reserve ratioSubstantial reduction of reserve ratio Maybe more reverse LTRO´s or structural Maybe more reverse LTRO´s or structural
operationsoperations No monetary policy outright portfolio No monetary policy outright portfolio
VI. Optimal size and composition openVI. Optimal size and composition openmarket operationsmarket operations
Implications for monetary policy Implications for monetary policy implementation?implementation?
Not convinced that current situation requiresNot convinced that current situation requires substantial changessubstantial changes Substantial reduction of reserve ratioSubstantial reduction of reserve ratio Maybe more reverse LTRO´s or structural Maybe more reverse LTRO´s or structural
operationsoperations No monetary policy outright portfolio No monetary policy outright portfolio
VII Future challenges:VII Future challenges:
a)a) the management of the volatility of short term the management of the volatility of short term interest ratesinterest rates
b)b) determining the optimal size and composition of determining the optimal size and composition of central bank balance sheetcentral bank balance sheet
c)c) the appropriate level of communication with the the appropriate level of communication with the financial marketsfinancial markets
d)d) contribute to further integration of financial contribute to further integration of financial markets by harmonising and expanding collateral markets by harmonising and expanding collateral instrumentsinstruments
VII Future challenges:VII Future challenges:
a)a) the management of the volatility of short term the management of the volatility of short term interest ratesinterest rates
b)b) determining the optimal size and composition of determining the optimal size and composition of central bank balance sheetcentral bank balance sheet
c)c) the appropriate level of communication with the the appropriate level of communication with the financial marketsfinancial markets
d)d) contribute to further integration of financial contribute to further integration of financial markets by harmonising and expanding collateral markets by harmonising and expanding collateral instrumentsinstruments
Hans PijlHans PijlDivision Financial Markets Division Financial Markets Department Treasury and MonitoringDepartment Treasury and Monitoring
Phone number 00 31 20 524 2214 Phone number 00 31 20 524 2214