|Future ECB Headquarters in Frankfurt am Main|
“Achieving a single monetary policy entails defining the instruments and procedures to be used by the Eurosystem in order to implement such a policy in a uniform manner throughout the Member States whose currency is the euro.”
- Buying and selling securities in financial markets become open market operations.
- Deposits and lending become standing facilities for banks.
- The minimum amount that you have to put on the table to become a private bank's client is called minimum reserve requirements.
- What does the ECB intend to achieve?
- How can the ECB achieve its goals?
- Reverse transactions designate repurchase agreements and collateralized loans. The ECB does reverse transactions for all of the above goals.
- Outright transactions designate purchases or sales of eligible assets in financial markets. They are used for structural operations, without standardized frequency, and on a bilateral basis. An outright purchase provides liquidity, whereas an outright sale absorbs liquidity.
- For structural operations, the ECB can also issue debt certificates with a maturity of less than 12 months. The certificates are freely transferable and carry interest by issuing them at a discount and paying back only the nominal upon maturity.
- The ECB uses foreign exchange swaps for fine-tuning operations. These swaps involve only widely traded currencies and are done in accordance with standard market practice. They can provide or absorb liquidity, incur any frequency or maturity, and are executed trough tenders or bilateral procedures.
- Finally, the ECB can collect fixed-term deposits. It uses this instrument for fine-tuning operations and to absorb liquidity in the market. Deposits are made for a fixed term and at fixed interest rates. The ECB provides no collateral.
- provide and absorb overnight liquidity,
- put monetary policy into practice, and
- bound overnight market interest rates.
|Current ECB Headquarters in Frankfurt am Main|