Transcript Presentation of the eurosystem

The Eurosystem operations frameworks and
liquidity management technique in normal times
Delphine Guillemet
Central banking, liquidity risk and financial
stability
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Agenda
Introduction
• Presentation of the Eurosystem
• Definition of monetary policy implementation
Scope of action
• Eurosystem’s minimum reserve system
• Eligible counterparties
Tools of the monetary policy implementation
• Open Market Operations
• Standing facilities
Collateral to the monetary operations
Balance sheet
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Presentation of the Eurosystem

The central banking system in
the Euro area, comprising:



The European Central Bank (ECB),
The national central banks of the
EU member states whose
currency is Euro.
The primary objective of the
Eurosystem is to maintain price
stability, as defined in Article
105 of the Treaty.
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Monetary policy implementation

Monetary policy implementation consists in:



Establishing an operationnal framework to control the selected operationnal
target;
Using on a day-by-day basis the available instruments to influence the scarcity
of the Central Bank money.
Main tools of the monetary policy implementation for the
Eurosystem:

Reserve requirements,

Open Market Operations,

Standing Facilities.
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Eurosystem’s minimum reserve system
Scope
• The credit institutions in the euro area
Primary aim
• To stabilise money market interest rates
• To create (or enlarge) a structural liquidity shortage
Reserve
requirement
• Is determined for each institution in relation to
elements of its balance sheet
Compliance
• Is determined on the basis of the institutions’ average
daily reserve holdings over the maintenance period
Remuneration
• The rate of the Eurosystem’s main refinancing
operations
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Eligible counterparties
Institutions fulfilling the
general eligibility criteria
may:
• access the Eurosystem’s
standing facilities;
• participate in Eurosystem
open market operations
that are based on standard
tenders.
These general eligibility
criteria are uniform
throughout the euro area.
Financial
soundness
be subject to at least one
form of harmonised
EU/EEA supervision by
national authorities
Fulfilment of other
contractual
arrangement
Eurosystem’s
minimum reserve
applied by the
respective national
central bank or the
ECB
(Article 19.1 of the
Statute of the ESCB)
Eligibility
criteria
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Open Market Operations
• Initiated by the ECB, which also decides on the instrument to be used
and on the terms and conditions for its execution.
• Five types of instruments are available to the Eurosystem for the
conduct of open market operations:
• Reverse transaction,
• Outright transactions,
• Issuance of debt certificates,
• Foreign exchange swaps,
• Collection of fixed-term deposits.
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Open Market Operations’ procedures
Eurosystem open market operations are normally executed in the form
of tenders.
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Standing facilities
Standing facilities
Marginal lending facility:
to obtain overnight liquidity
from the national central banks
against eligible assets.
Deposit facility:
to make overnight deposits with
the national central banks.
Features
• providing and absorbing
overnight liquidity
• available to eligible
counterparties on their own
initiative
• no credit limits or other
restrictions on counterparties’
access to the facility
• a ceiling or a floor for the
overnight market interest rate
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Key ECB interest rates and EONIA since 1999
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Eurosystem monetary policy operations
Source: ECB (2008), The implementation of monetary politicy in the euro area.
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Eligible assets for Eurosystem monetary
policy operations
• Article 18.1 of the Statute of the ESCB, all Eurosystem credit
operations have to be based on adequate collateral.
• The “Single List” entered into effect on 1 January 2007, is the single
framework defining eligible collateral common to all Eurosystem
credit operations.
• It comprises two distinct asset classes:
• marketable assets,
• non-marketable assets.
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Criteria of the “Single List”
Source: ECB (2008), The implementation of monetary politicy in the euro area.
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Central bank balance sheet structure
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Source: ECB (2011), The monetary policy of the ECB.
Consolidated balance sheet of the Eurosystem
as at 31 December 2007
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Thank you for your attention.
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