The European Central Bank overnight reactivated several measures to support the liquidity of banks, introduced another, and set out a framework for its liquidity operations until the middle of 2012.
Alongside increasing talk of willingness by key European governments to further invest in capital to support banks the measures are intended to temper the difficulties of many banks in Europe in managing their liquidity requirements.
The ECB will offer a 12-month tender of liquidity later this month and a second tender with an maturity of around 13 months in December. The ECB said both tenders will be for an unlimited size, the
Wall Street Journal reports.
The bank will fix the rate at the average rate of the bank's weekly Main Refinancing Operations over the period of the tender.
The ECB will also continue to offer unlimited liquidity at its one-week, one-month and three-month operations at least until July 2012.
The bank will buy up to €40 billion in covered bonds starting in November, a measure that may highlight a lack of investor confidence in this form of bank funding that Australian banks will begin to employ (if they can find investors) some time next year.
The ECB will undertake its purchases of covered bonds in the primary and secondary markets over the next year.
It also extended its guarantee of providing "limit-free" free funding in its short-term liquidity operations until the middle of next year.
The retiring ECB chief, Jean-Claude Trichet, said, though, said it would be inappropriate for the ECB to lend to Europe's main bailout vehicle, the European Financial Stability Facility as some influential advisers in North America and Europe propose.