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The Eurosystem operational framework, use of colleteral and liquidity distribution in the euro area: towards a single interbank market?

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  • Gianfranco A. Vento

    () (Università degli Studi di Roma "La Sapienza", Facoltà di Economia, Roma (Italy))

Abstract

This paper analyses the current operational framework chosen to implement singlemonetary policy in the euro area, pointing out the effects of certain technical choices in the field of monetary policy instruments on the interbank market and bank treasuries. In particular, I examine how the tender typology adopted for main refinancing operations affects overbidding and underbidding, as well as efficiency in bank liquidity management. I then go on to analyse the technical features of unsecured interbank markets in the euro area in order to determine whether a screen-based framework leads to more efficient liquidity management than achieved in over-the-counter markets. In accordance with the averaging provision mechanism, minimum reserves during the maintenance period in Italy, where the interbankmarket is electronic-based, are taken as indicators of efficiency in this market. On the evidence of the data, it seems that Italian banks can reduce the opportunity cost of maintaining minimum reserves, also performing intertemporal arbitrages between theinterbank market and their reserve accounts. Finally, the focus comes on cross border differences in the use of collateral within the euro area in order to analyse the projects currently debated for the reform of collateral lists.

Suggested Citation

  • Gianfranco A. Vento, 2004. "The Eurosystem operational framework, use of colleteral and liquidity distribution in the euro area: towards a single interbank market?," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 57(228), pages 71-100.
  • Handle: RePEc:psl:bnlaqr:2004:13
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9822/9707
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    References listed on IDEAS

    as
    1. Dieter Nautz & Jörg Oechssler, 2003. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(2), pages 207-220, June.
    2. Hartmann, Philipp & Manna, Michele & Manzanares, Andres, 2001. "The microstructure of the euro money market," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 895-948, November.
    3. Välimäki, Tuomas, 2002. "Variable rate liquidity tenders," Research Discussion Papers 24/2002, Bank of Finland.
    4. Xavier Freixas, 2005. "Interbank Market Integration under Asymmetric Information," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 459-490.
    5. Juan Ayuso & Rafael Repullo, 2003. "A Model of the Open Market Operations of the European Central Bank," Economic Journal, Royal Economic Society, vol. 113(490), pages 883-902, October.
    6. Nyborg, Kjell G. & Strebulaev, Ilya A. & Bindseil, Ulrich, 2002. "Bidding and performance in repo auctions: evidence from ECB open market operations," Working Paper Series 0157, European Central Bank.
    7. Paolo Angelini, 2008. "Liquidity And Announcement Effects In The Euro Area," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 67(1), pages 1-20, March.
    8. Nautz, Dieter & Linzert, Tobias & Breitung, Jörg, 2003. "Bidder Behavior in Repo Auctions without Minimum Bid Rate: Evidence from the Bundesbank," Discussion Paper Series 1: Economic Studies 2003,13, Deutsche Bundesbank.
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    More about this item

    Keywords

    Monetary Policy; Monetary; Policy;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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