ANNUAL REPORT 2008 - Polymer Bank Notes of the World

LTROs settling on 21 February and 13 March,in each of which €60 billion was allotted).Two of the six-month supplementary LTROswere conducted for an amount of €25 billion(on 2 April and 9 July), and one was conductedfor an amount of €50 billion (on 8 October).As of 30 October 2008 longer-term operationswere also conducted as fixed rate tenders withfull allotment. The rate applied in all theseoperations was the MRO rate. The changeto fixed rate tenders led to a general increasein allotment amounts also for longer-termoperations. However, given strong expectationsof a cut in key ECB interest rates, especiallytowards the end of 2008, the fixed rate appliedin these tenders led to only a moderate increasein allotment amounts for supplementary LTROswith a maturity of three or six months. At theend of 2008 the outstanding amount of alllonger-term operations (LTROs, supplementaryLTROs and special-term refinancing operations)stood at €617 billion, which represented thelargest share of ECB refinancing to the bankingsector ever, at roughly 72% of all open marketoperations.LTROs are open to the same set of counterpartiesas MROs, 157 of which participated on averageduring 2008, compared with 145 in 2007.The introduction of fixed rate tenders led toa decrease in the average number of biddersin the LTROs from 161 (in variable ratetenders) to 146 (in fixed rate tenders). In thespecial-term refinancing operations, which arealso open to the same set of counterparties,210 counterparties participated in the variablerate tender settled on 30 September, while anaverage of 97 counterparties participated in thefollowing two fixed rate tenders.The ECB may conduct liquidity-providing andliquidity-absorbing fine-tuning operations onan ad hoc basis to manage liquidity conditionsin the market and to steer interest rates. Until5 October 2008 the Eurosystem selected alimited number of counterparties most active inthe money market for these operations (136 on30 September 2008). Following a decision bythe Governing Council, from 6 October 2008access to fine-tuning operations was widenedby granting eligibility to all counterparties thatare eligible to participate in Eurosystem openmarket operations based on standard tenders,and that additionally fulfil certain selectioncriteria specified by the respective NCBs.In 2008 the ECB conducted 25 fine-tuningoperations. The practice of conducting end-ofperiodfine-tuning operations was maintainedthroughout the year, with 12 of these operationstaking place on the last day of the maintenanceperiods. The remaining 13 were conducted inresponse to prevailing liquidity conditions andshort-term money market interest rates. On2 and 3 January, when tensions related to theyear-end eased, liquidity-absorbing fine-tuningoperations were conducted in an environmentof excess liquidity supply. On 20 and 31 Marchliquidity was provided in fine-tuning operationsas a result of money market tensions related tothe Easter holiday period and the bankruptcyof Bear Stearns. To address the heightenedpressure in money markets in September, theECB conducted nine fine-tuning operationsbetween 15 September and 9 October, five ofwhich were liquidity-providing and four ofwhich were liquidity-absorbing.STANDING FACILITIESCounterparties may use the two standingfacilities on their own initiative to obtainovernight liquidity against eligible collateral orto place overnight deposits with the Eurosystem.At the end of 2008, 2,267 counterparties hadaccess to the marginal lending facility and2,802 counterparties had access to the depositfacility. The rates for these facilities in principleprovide a ceiling and a floor for the overnightrate and therefore perform an important functionfor monetary policy implementation.In October 2008, following a decision by theGoverning Council, the width of the corridorformed by these two rates was reduced from200 to 100 basis points symmetrically aroundthe MRO rate as a measure to alleviate tensionsin the money market. This measure, together106 ECBAnnual Report2008