With the outbreak of the global financial crisis in 2007 and the turmoil it brought about in the international banking system, trust between commercial banks increasingly dwindled, which significantly hampered the redistribution of liquidity via the interbank market that is necessary for a functioning corridor system. Banks in the euro area began to hoard liquidity or not lend it indiscriminately to banks that were in need of liquidity, meaning that the short-term money market no longer facilitated the smooth distribution of liquidity. The volatility of short-term interest rates went up significantly. As a result, the ECB Governing Council adopted a series of non-standard monetary policy measures, thereby changing the way in which the operational framework is used to implement monetary policy.

Since October 2008, all regular monetary policy refinancing operations have been conducted as fixed rate tender procedures with full allotment within an expanded collateral framework. In addition, the Eurosystem also conducted supplementary longer-term refinancing operations with a maturity of between 3 and 12 months and provided foreign currency to address liquidity stress in the banking sector. The introduction of full allotment meant that the Eurosystem no longer limited the amount of liquidity that it provided, instead fully meeting demand in the banking system. Additionally, aiming to improve funding conditions and liquidity in the tight market for private debt securities, the Eurosystem also conducted monetary policy asset purchases worth €60 billion starting in June 2009 under the covered bond purchase programme (CBPP).

For more details on the information presented here, please see the links below.