The European sovereign debt crisis was characterised by the fact that some euro area countries, owing to their high levels of debt – caused in part by efforts to counter the consequences of the global financial crisis – experienced difficulties refinancing their debt and, in some cases, lost access to capital market funding. In order to protect monetary policy transmission and safeguard sufficient liquidity provision for the financial system, the ECB Governing Council adopted various non-standard measures during the course of the crisis that went beyond the scope of the usual operational framework at that time.

In order to counteract the severe tensions in some segments of the financial market, the Eurosystem launched an asset purchase programme for the secondary market (Securities Markets Programme – SMP) in May 2010, which enabled the purchase of public and private bonds in unlimited quantities. This programme was intended to ensure the uniform transmission of monetary policy but not to have any impact on the monetary policy stance itself. The liquidity created by these purchases was subsequently absorbed again through appropriate instruments. In addition, the Eurosystem took measures including the resumption of US dollar liquidity-providing operations carried out as fixed rate tender procedures with full allotment.

In November 2011, the Eurosystem resumed the purchase of covered bonds under a second covered bond purchase programme (CBPP2). In December 2011, the ECB Governing Council also decided to supplement the non-standard measures taken up to that point with two longer-term refinancing operations with a maturity of three years each, which were also conducted as fixed rate tender procedures with full allotment, and to reduce the minimum reserve ratio applicable up to that point from 2% to 1%.

With the termination of the SMP in September 2012, the ECB Governing Council took decisions on a number of technical features for monetary policy outright operations in secondary sovereign bond markets (Outright Monetary Transactions – OMTs), to be attached to an EFSF/ESM programme. There are no ex ante quantitative limits, but the liquidity provided in the event of the OMT programme being activated should be fully absorbed through targeted operations. To date, the OMT programme has not been activated.

While the liquidity-providing effect of the SMP was neutralised by liquidity-absorbing fine-tuning operations until mid-2014, the two longer-term refinancing operations, in particular, led to excess liquidity in the euro area banking system rising significantly. Ultimately, short-term money market rates fell below the main refinancing operations rate and began to converge towards the deposit facility rate.

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