Published as part of the ECB Economic Bulletin, Issue 6/2024.
This box describes liquidity conditions and the Eurosystem monetary policy operations during the third and fourth reserve maintenance periods of 2024. Together, these two maintenance periods ran from 17 April to 23 July 2024 (the “review period”).
Average excess liquidity in the euro area banking system continued to decline to €3,176.5 billion over the review period. This was due to the maturing of the eighth operation under the third series of targeted longer-term refinancing operations (TLTRO III.8) and early repayments by banks of outstanding amounts under other TLTRO III operations on 26 June 2024. Liquidity provision also diminished owing to lower holdings under the asset purchase programmes (APPs), driven by the discontinuation of reinvestments under the APP from the beginning of July 2023. Pandemic emergency purchasing programme (PEPP) holdings also began to decrease from the beginning of July, with principal payments from maturing securities now being only partially reinvested. The lower liquidity provision was partly offset by the continuing decline in net autonomous factors.
Liquidity needs
The average daily liquidity needs of the banking system, defined as the sum of net autonomous factors and reserve requirements, decreased by €47.1 billion to €1,484.0 billion over the review period. This was due almost entirely to a €47.2 billion decline in net autonomous factors to €1,322.5 billion (see the section of Table A entitled “Other liquidity-based information”), driven by an increase in liquidity-providing autonomous factors that was not fully offset by a rise in liquidity-absorbing autonomous factors. Minimum reserve requirements edged up marginally by €0.1 billion to €161.6 billion.
Liquidity-absorbing autonomous factors increased by €20.8 billion to €2,640.6 billion over the review period, owing mainly to a rise in other autonomous factors. On average, net other autonomous factors grew by €47.5 billion. This was primarily due to an increase in the revaluation accounts of €66.4 billion linked to rising gold prices, the liquidity impact of which was largely offset by higher net foreign assets. Government deposits, which fell by an average of €36.9 billion over the review period to €117.7 billion, were therefore the primary driver of the decline in net autonomous factors (see the section of Table A entitled “Other liquidity-based information”). This decrease reflected the continued normalisation of the overall volume of deposits held by national treasuries with the Eurosystem that was also spurred by the changes in remuneration that came into effect on 1 May 2023 and that were subsequently confirmed by the Governing Council on 16 April 2024 (see Economic Bulletin, Issue 4, 2024). The average value of banknotes in circulation increased by €10.3 billion over the review period to €1,554.9 billion. Banknote demand has stabilised at lower levels after peaking at just over €1,600 billion in July 2022.
Liquidity-providing autonomous factors rose by €68.3 billion to stand at €1,318.6 billion, owing primarily to an increase in net foreign assets of €65.8 billion. The rise in net foreign assets was driven by an average increase in the value of gold reserves of €61.4 billion attributable to higher gold prices. Net assets denominated in euro increased slightly, by €2.5 billion, over the review period.
Table A
Eurosystem liquidity conditions
Liabilities
(averages; EUR billions)
Current review period: 17 April‑23 July 2024 | Previous review period: | |||||||
|---|---|---|---|---|---|---|---|---|
Third and fourth maintenance periods | Third maintenance period: | Fourth maintenance period: | First and second maintenance periods | |||||
Liquidity-absorbing autonomous factors | 2,640.6 | (+20.8) | 2,632.4 | (+14.1) | 2,651.5 | (+19.1) | 2,619.7 | (-33.7) |
Banknotes in circulation | 1,554.9 | (+10.3) | 1,551.5 | (+5.2) | 1,559.5 | (+8.0) | 1,544.6 | (-9.1) |
Government deposits | 117.7 | (-36.9) | 119.5 | (-18.3) | 115.2 | (-4.3) | 154.6 | (-27.7) |
Other autonomous factors (net)1) | 968.0 | (+47.5) | 961.4 | (+27.2) | 976.8 | (+15.4) | 920.6 | (+3.1) |
Current accounts above minimum reserve requirements | 5.7 | (-1.3) | 5.4 | (-1.4) | 6.2 | (+0.8) | 7.0 | (-1.1) |
Minimum reserve requirements2) | 161.6 | (+0.1) | 161.3 | (-0.3) | 161.9 | (+0.7) | 161.5 | (-1.7) |
Deposit facility | 3,170.8 | (-250.6) | 3,214.0 | (-124.0) | 3,113.2 | (-100.7) | 3,421.3 | (-99.1) |
Liquidity-absorbing fine-tuning operations | 0.0 | (+0.0) | 0.0 | (+0.0) | 0.0 | (+0.0) | 0.0 | (+0.0) |
Source: ECB.
Notes: All figures in the table are rounded to the nearest €0.1 billion. Figures in brackets denote the change from the previous review or maintenance period.
1) Computed as the sum of the revaluation accounts, other claims and liabilities of euro area residents, and capital and reserves.
2) Memo item that does not appear on the Eurosystem balance sheet and should therefore not be included in the calculation of total liabilities.
Assets
(averages; EUR billions)
Current review period: 17 April‑23 July 2024 | Previous review period: | |||||||
|---|---|---|---|---|---|---|---|---|
Third and fourth maintenance periods | Third maintenance period: | Fourth maintenance period: | First and second maintenance periods | |||||
Liquidity-providing autonomous factors | 1,318.6 | (+68.3) | 1,311.3 | (+39.1) | 1,328.3 | (+17.1) | 1,250.3 | (+64.1) |
Net foreign assets | 1,045.4 | (+65.8) | 1,031.7 | (+36.2) | 1,063.7 | (+32.1) | 979.6 | (+34.8) |
Net assets denominated in euro | 273.2 | (+2.5) | 279.6 | (+2.9) | 264.6 | (-15.0) | 270.7 | (+29.3) |
Monetary policy instruments | 4,660.5 | (-299.0) | 4,702.3 | (-150.3) | 4,604.9 | (-97.4) | 4,959.5 | (-199.9) |
Open market operations | 4,660.5 | (-299.0) | 4,702.3 | (-150.3) | 4,604.9 | (-97.4) | 4,959.5 | (-199.9) |
Credit operations | 134.0 | (-199.9) | 151.6 | (-100.6) | 110.6 | (-40.9) | 334.0 | (-123.5) |
MROs | 3.9 | (-0.0) | 2.5 | (-0.3) | 5.7 | (+3.2) | 3.9 | (-3.7) |
Three-month LTROs | 7.7 | (+1.3) | 8.1 | (+0.2) | 7.0 | (-1.2) | 6.4 | (+2.0) |
TLTRO III | 122.5 | (-201.2) | 140.9 | (-100.5) | 97.9 | (-43.0) | 323.7 | (-121.8) |
Outright portfolios1) | 4,526.5 | (-99.0) | 4,550.7 | (-49.7) | 4,494.3 | (-56.5) | 4,625.5 | (-76.5) |
Marginal lending facility | 0.0 | (-0.0) | 0.0 | (-0.0) | 0.0 | (+0.0) | 0.0 | (-0.0) |
Source: ECB.
Notes: All figures in the table are rounded to the nearest €0.1 billion. Figures in brackets denote the change from the previous review or maintenance period. MROs stands for main refinancing operations, LTROs for longer-term refinancing operations and TLTRO III for the third series of targeted longer-term refinancing operations.
1) With the discontinuation of net asset purchases, the individual breakdown of outright portfolios is no longer shown.
Other liquidity-based information
Current review period: 17 April‑23 July 2024 | Previous review period: | |||||||
|---|---|---|---|---|---|---|---|---|
Third and fourth maintenance periods | Third maintenance period: | Fourth maintenance period: | First and second maintenance periods | |||||
Aggregate liquidity needs1) | 1,484.0 | (-47.1) | 1,482.9 | (-25.1) | 1,485.5 | (+2.6) | 1,531.2 | (-99.7) |
Net autonomous factors2) | 1,322.5 | (-47.2) | 1,321.6 | (-24.8) | 1,323.6 | (+1.9) | 1,369.7 | (-98.0) |
Excess liquidity3) | 3,176.5 | (-251.8) | 3,219.3 | (-125.3) | 3,119.4 | (-100.0) | 3,428.3 | (-100.2) |
Source: ECB.
Notes: All figures in the table are rounded to the nearest €0.1 billion. Figures in brackets denote the change from the previous review or maintenance period.
1) Computed as the sum of net autonomous factors and minimum reserve requirements.
2) Computed as the difference between autonomous liquidity factors on the liabilities side and autonomous liquidity factors on the assets side. For the purposes of this table, items in the course of settlement are also added to net autonomous factors.
3) Computed as the sum of current accounts above minimum reserve requirements and the recourse to the deposit facility minus the recourse to the marginal lending facility.
Interest rate developments
(averages; percentages and percentage points)
Current review period: | Previous review period: | |||||||
|---|---|---|---|---|---|---|---|---|
Third maintenance period: | Fourth maintenance period: | First maintenance period: | Second maintenance period: | |||||
MROs | 4.50 | (+0.00) | 4.25 | (-0.25) | 4.50 | (+0.00) | 4.50 | (+0.00) |
Marginal lending facility | 4.75 | (+0.00) | 4.50 | (-0.25) | 4.75 | (+0.00) | 4.75 | (+0.00) |
Deposit facility | 4.00 | (+0.00) | 3.75 | (-0.25) | 4.00 | (+0.00) | 4.00 | (+0.00) |
€STR | 3.907 | (-0.000) | 3.663 | (-0.244) | 3.907 | (+0.01) | 3.907 | (+0.000) |
RepoFunds Rate Euro | 3.953 | (+0.007) | 3.714 | (-0.239) | 3.955 | (+0.049) | 3.947 | (-0.008) |
Sources: ECB, CME Group and Bloomberg.
Notes: Figures in brackets denote the change in percentage points from the previous review or maintenance period. MROs stands for main refinancing operations and €STR for euro short-term rate.
Liquidity provided through monetary policy instruments
The average amount of liquidity provided through monetary policy instruments decreased by €299.0 billion to €4,660.5 billion over the review period (Chart A). The reduction in liquidity supply was driven primarily by a decline in credit operations and, to a lesser extent, by a reduction in outright portfolios.
The average amount of liquidity provided through credit operations fell by €199.9 billion to €134.0 billion over the review period. This largely reflects the decline in outstanding TLTRO III amounts owing to the maturing of TLTRO III.8 (€47.4 billion), together with early repayments of other TLTRO III funds (€17.1 billion) on 26 June 2024. The average outstanding amount of Eurosystem three-month long-term refinancing operations (LTROs) increased marginally, by €1.3 billion, while the stock of main refinancing operations (MROs) remained broadly unchanged. The limited participation of banks in these regular operations and their ability to repay sizeable TLTRO funds without switching to regular refinancing operations reflect the comfortable liquidity positions of banks, on aggregate, and the availability of alternative funding sources at attractive rates.
The average amount of liquidity provided through holdings of outright portfolios decreased by €99.0 billion to €4,526.5 billion over the review period. This was due to the discontinuation of reinvestments under the APP from 1 July 2023 and, to a minor extent, to partial reinvestments under the PEPP since 1 July 2024.[1], [2]
Chart A
Changes in liquidity provided through open market operations and excess liquidity
(EUR trillions)
Source: ECB.
Note: The latest observations are for 23 July 2024.
Excess liquidity
Average excess liquidity decreased by €251.8 billion over the review period to stand at €3,176.5 billion (Chart A). Excess liquidity is the sum of bank reserves above minimum reserve requirements and the recourse to the deposit facility net of the recourse to the marginal lending facility. It reflects the difference between the total liquidity provided to the banking system and the liquidity needs of banks to cover minimum reserves. After peaking at €4,748 billion in November 2022, excess liquidity has steadily declined.
Interest rate developments
The Governing Council cut each of the three key ECB interest rates by 25 basis points, with effect from 12 June 2024. The rates on the deposit facility, MROs and the marginal lending facility stood at 3.75%, 4.25% and 4.50% respectively at the end of the review period.
The average euro short-term rate (€STR) reflected the policy rate cuts, while maintaining a stable spread with the ECB’s deposit facility rate. On average, the €STR traded 9.0 basis points below the deposit facility rate throughout the review period, compared with the 9.3 basis points average for the first two maintenance periods in 2024.
The average euro area repo rate, as measured by the RepoFunds Rate Euro index, continued to trade close to the deposit facility rate. On average, the repo rate was 4.2 basis points below the deposit facility rate over the review period, compared with the 4.9 basis points average in the first two maintenance periods of 2024. This reflects the ongoing reversal of factors that exert downward pressure on repo rates, such as the higher net issuance since the beginning of the year, the release of mobilised collateral pledged against maturing/repaid TLTROs and the increased availability of public securities as a consequence of the decline in outstanding APP and PEPP holdings.
Securities held in the outright portfolios are carried at amortised cost and revalued at the end of each quarter, which also has an impact on the total averages and the changes in the outright portfolios.
In June 2024 the Governing Council confirmed that the ECB will only partially reinvest principal payments from maturing securities under the PEPP over the second half of 2024 and will discontinue reinvestments altogether at the end of 2024.