ANNUAL REPORT 2008 - Polymer Bank Notes of the World

with the ample allotments in the fixed rate openmarket operations, led to a significant increasein the use of the deposit facility (see Chart A inBox 10). Until 8 October the average daily useof the deposit facility was €2.5 billion (comparedwith €0.5 billion in 2007). In the period from9 October until the end of the year, this figureincreased dramatically to €208.5 billion. Duringthis period, recourse to the deposit facilityfollowed a broadly similar pattern during eachreserve maintenance period: the amounts wererelatively low at the beginning of each period, butincreased subsequently as more counterpartiesfulfilled their reserve requirements.The daily average recourse to the marginallending facility was €0.9 billion until 8 October2008 (compared with €0.2 billion in 2007), andincreased to €6.7 billion thereafter. This risereflects the lower interest rate on this facility,in relative terms, as a result of the reducedcorridor, but to some extent may also be linkedto heightened uncertainty about individual bankliquidity needs.ELIGIBLE ASSETS FOR MONETARY POLICYOPERATIONSIn line with central bank practice worldwide,all credit operations of the Eurosystem arebased on adequate collateral. The concept ofadequacy implies, first, that the Eurosystemis to a large extent protected from incurringlosses in its credit operations and, second, thatsufficient collateral should be available to a wideset of counterparties, so that the Eurosystemcan provide the amount of liquidity it deemsnecessary through its monetary policy andpayment systems operations. To facilitate this,the Eurosystem accepts a broad range of assets ascollateral in all its credit operations. This featureof the Eurosystem’s collateral framework,together with the fact that access to Eurosystemopen market operations is granted to a large poolof counterparties, has been key to supporting theimplementation of monetary policy in times ofstress. The inbuilt flexibility of its operationalframework allowed the Eurosystem to providethe necessary liquidity to address the impairedfunctioning of the money market withoutencountering widespread collateral constraintsthroughout much of 2008. It was only towards theend of the year that, in the light of the extensionof refinancing for terms longer than overnight ineuro and in US dollars as well as the recourseto fixed rate full allotment tender procedures, theGoverning Council decided to expand the list ofeligible collateral on a temporary basis until theend of 2009 (see Box 10).In 2008 the average amount of eligiblecollateral increased by 17.2%, compared with2007, to a total of €11.1 trillion (see Chart 43).General government debt, at €4.9 trillion,accounted for 44% of the total, while theremainder of marketable collateral was in theform of uncovered bank bonds (€2.2 trillion,or 20%), covered bank bonds (€1.2 trillion, or11%), asset-backed securities (€1.1 trillion,or 9%), corporate bonds (€0.9 trillion, or8%), and other bonds, such as those issued bysupranational organisations, (€0.6 trillion, or5%). The overall volume of marketable assetseligible as a result of the temporary measures toChart 43 Eligible collateral by asset type(EUR billions; annual averages)12,00010,0008,0006,0004,0002,0000Source: ECB.non-marketable assetsother marketable assetsasset-backed securitiescorporate bondscovered bank bondsuncovered bank bondsregional government securitiescentral government securities2004 2005 2006 2007 200812,00010,0008,0006,0004,0002,0000ECBAnnual Report2008107