ECB released its weekly statement for the week ending on 29 June.

Asset Side

On the asset side, weekly USD liquidity-providing operations increased from $1.6bn to $2.6bn (+$1bn), continuing the trend of growth in USD swap usage. Lending to credit institutions increased by €20.3bn through a larger MRO of €180.4bn as well as an increase in LTRO (+€8.2bn). ‘Other Claims’ (ELA) did not post any significant change which is a sign of stabilization.

Liabilities Side

Bank reserves increased by €21.5bn, mainly due to a large decrease in current accounts (€19.6bn). What is quite worrying is the fact that ‘Deposits related to margin calls’ increased by almost €4.3bn, which means that assets posted as collateral in ECB liquidity operations lost value. It will be interesting to see if this change is permanent or reverses course after the positive results of last week’s Euro summit. General government accounts decreased €4.3bn.

A very positive development was the fact that ‘Liabilities to non-euro area residents’ were stable last week, which means that (especially accounting for increased USD swap usage) there actually were some net euro inflows after a long time.

New MRO

This week’s MRO was lower than the maturing one (at €163.6bn, down €16.8bn from €180.4bn). Since the reserve maintenance period ends on 10 July and average current account holdings were around to €118.5bn (compared with a reserve requirement of €106.9bn), it is possible that the latest lower MRO bid is related with lower needs for reserve requirements and will be reflected in lower current account holdings (they were €95.9bn today). Still, total liquidity is higher today (deposit facility + current accounts + fixed term deposits) at €1112.9bn, compared to €1100bn in the financial statement, which might suggest funds movement from government accounts.