Analysis of Recent Monetary Operations & Financial Market Developments

As the financial crisis continued in 2012, developments in peripheral Europe and the ECB’s monetary policy continued to be closely watched by market participants as many banks remained heavily reliant on central bank funding and the level of ECB borrowing increased to record highs. In this article, we review 2012 and the first five months of 2013, examining the main changes to the ECB’s operational framework and the evolution of Eurosystem lending, particularly the allotment and subsequent Early Repayment Operations (EROs) related to the two 3-year Longer Term Refinancing Operations (LTROs). The article studies the use of the ECB’s standing facilities, while it also reports on the improvement in money markets over the review period. Finally, we also examine the Irish sovereign’s return to debt markets before briefly analysing changes in TARGET2 balances over 2012.