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The ECB released its weekly statement for the week ending at 21 December 2012. Since on 21/12/2012 Greek government titles began to be accepted as collateral in ECB refinancing operations this week’s statement should provide for a closer look at the magnitude of the change in Greek banks borrowings.

Asset Side

Looking into the asset side ‘Other claims’ were lower by €20.7bn which should correspond to the reduction of the use of ELA by the Greek banking system. Since MROs happen in the middle of the week, Greek banks would only have access to the marginal lending facility which shows an increase of €13.61bn. The almost €7bn difference should most probably be attributed to the (cash) part of the December Greek disbursement which would be used for budget needs (the rest of the funds were in the form of EFSF notes and bills). Regular operations (MRO and LTRO) were lower by €4.9bn which should be attributed to the generally positive climate since the OMT announcement.

Liability Side

On the liability side banknotes in circulation show a very large increase of €11.91bn, probably of seasonal (Christmas) nature. Bank reserves are 11.62bn lower and liabilities to other euro area residents by €18.27bn, both in the case of ‘General Government’ and ‘Other liabilities’. Liabilities to non-euro area residents are €3.57bn higher which is a negative development.


The latest MRO (which should include any borrowing by Greek banks from the marginal lending facility being moved to the regular lower rated weekly operation) shows an increase of €17bn from €72.8bn to €89.66bn. In general, it seems that Greek banks managed to move a large part of their ELA borrowing to the ECB regular operations while also lowering their Target2 liabilities (with the help of the disbersement). Things will be much clearer when BoG releases its December balance sheet.

On a related note, the ECB also included the Greek collateral haircut list in its decision of 19 December. The haircuts are quite heavy (15% for T-Bills of up to 1 year maturities) but will still allow for much lower yields in the forthcoming T-Bill auctions which could move close to 1% (from over 4%). Such a development would make current T-Bills a high return investment. Remaining Greek bonds will face haircuts of 56-57% which should place a rather high floor on their yields.

Greek collateral haircuts

ECB released its weekly statement for the week ending at 8 June 2012.

Based on an increase in the MRO last week (and the fact that ECB data pointed to an increase in net autonomous factors) i anticipated that ECB’s liabilities would increase by roughly the same amount. It turns out that the increase was ELA repayment after all, with the latter decreasing by€ 61bn (a very large amount). Lending from the ECB increased by €69.5bn, mostly through the MRO (€68.2bn increase), although the marginal lending facility also increased by €1.2bn.

On the liability side, the important observation is the continued increase in ‘Liabilities to non-euro area residents denominated in euro’ which grew by €13.2bn and is most probably attributed to SNB foreign reserves accumulation. The inflow into swiss assets is quite evident in the negative yield swiss bond curve:

Apart from the weekly statement, an MRO and LTRO was also conducted today. Compared to the previous MRO, this week’s operation increased by €12.4bn (€131.8bn vs €119.4bn) while the 1 month LTRO grew  by €5.9bn (€18.9bn from €13bn), a total increase of roughly €18.3bn which is surely a large amount.

Here are a few comments on ECB’s latest financial statement for the week ending at 16 March 2012:

  • Deposits related to margin calls dropped to nearly zero (a decrease of more than 17 billion €). This is clearly a very positive sign, highlighting the fact that the collateral posted by European banks to the ECB in its refinancing operations achieved a value close to the one during the loans inception. There was also a drop in the deposit facility which was offset by increased usage of the current accounts.
  • ECB’s lending to financial institutions increased by more than 31 billion €. The troubling fact was that 11 billion € came from increased use of the marginal lending facility (an overnight facility). Another 24.6 billion € are attributed to the latest MRO which came at 42 billion €, a number much larger than the recent MROs after the second LTRO. On the other hand, the ‘Other assets’ category dropped by 45,6 billion €. In it’s recent February balance sheet, the central bank of Italy had a fine-tuning (??) operation of 46.9 billion €, which was booked as ‘Other assets’ in ECB’s weekly statement. It seems that this operation probably ended this week and was replaced by increased short-term funding through the MRO and marginal lending facility, keeping total bank funding steady.

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Kostas Kalevras

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