by Daniel Fricke and Franziska Schobert
Refinancing operations will play a central role in the Eurosystem as reserves continue to decline. This marks a shift from the past decade of asset purchases, but not from historical practice: prior to the global financial crisis (GFC), collateralized lending operations, in particular refinancing operations, already played a key role. This Policy Brief revisits the pre-GFC experience of German banks to assess two questions that are central today: will banks be operationally ready to use lending operations, and could their use raise communication challenges? The evidence suggests that banks were operationally ready to access reserves when needed. Lending volumes were typically concentrated among a limited number of institutions. Neither concentration nor occasional recourse, in itself, raised concerns about banks’ potential dependence on Eurosystem refinancing operations.
The views expressed represent the authors’ personal opinions and do not necessarily reflect the views of the Deutsche Bundesbank or the Eurosystem.
Link:
Lending operations are back: Lessons from German banks before the GFC