ANNUAL REPORT 2008 - Polymer Bank Notes of the World

3 Supplementary longer-term refinancing operationsFollowing a decision by the Governing Council on 15 October, the provision of longer-termrefinancing was enhanced by rolling over existing operations and launching new operations. Asa result, during each maintenance period four longer-term operations were conducted: one forthe length of the maintenance period (a special-term refinancing operation), two with a maturityof three months, and one with a maturity of six months. Consequently, by the end of 2008the share of MROs in the total refinancing volume had declined to about 28%, while LTROs,supplementary LTROs and the special-term refinancing operation accounted for the remaining72% (see Chart A).4 Additional US dollar and Swiss franc-providing operationsThe Eurosystem’s US dollar-providing operationsFrom mid-September 2008 strains in the US dollar money markets worsened significantly. Inparticular, the rates quoted for US dollar deposits during Asian, European and early US tradinghours were very high, at times reaching levels above 10%. Market liquidity in the foreignexchange swap market was also unusually low amid signs of increased stress and marketsegmentation, whereby access to US dollar funding became extremely difficult for institutionsoutside the United States. In response, the Eurosystem further reinforced its provision ofUS dollar liquidity to Eurosystem counterparties by adding operations with a 7-day and thereafteran overnight maturity to the existing 28-day and 84-day operations. It also further increased theamounts offered to counterparties in these US dollar-providing operations in two steps, each timealso increasing the swap line with the Federal Reserve System. In early October the maximumamounts in the Eurosystem’s US dollar liquidity-providing operations reached USD 50 billionin the overnight operations, USD 40 billion in the 28-day operations and USD 20 billion in the84-day operations.On 15 October, given the high levels of uncertainty prevailing in the banking system, the ECB,in coordination with the Federal Reserve System, committed to fulfil all bids at a fixed rate forthe 7-day, 28-day and 84-day operations, while the overnight operations were discontinued.In order to mitigate the potential problem of insufficient availability of eligible collateral, giventhe full allotment procedure in both euro and US dollar liquidity-providing operations, the ECBannounced on 15 October 2008 that the Eurosystem would also conduct US dollar liquidityprovidingoperations in the form of EUR/USD foreign exchange swaps. These foreign exchangeswap operations, conducted in parallel with the existing US dollar collateralised repurchaseoperations, were also financed through the swap agreement with the Federal Reserve System,which had been extended until 30 April 2009.The Eurosystem’s US dollar repurchase operations continued to meet with fairly high demand,with large bid amounts and a large number of bidders, whereas participation in the US dollarforeign exchange swap operations generally remained very limited in terms of both biddingvolumes and the number of participants.The Eurosystem’s Swiss franc-providing operationsThe increased tensions in international money markets observed in October 2008 also led toupward pressure on short-term Swiss franc money market rates. At the same time, the Swiss102 ECBAnnual Report2008