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

  • Gianfranco A. Vento


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

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    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.

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    Article provided by Banca Nazionale del Lavoro in its journal Banca Nazionale del Lavoro Quarterly Review.

    Volume (Year): 57 (2004)
    Issue (Month): 228 ()
    Pages: 71-100

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    Handle: RePEc:psl:bnlqrr:2004:13
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    1. 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.
    2. Tobias Linzert & Dieter Nautz & Jorg Breitung, 2004. "Bidder behaviour in repo auctions without minimum bid rate: evidence from the Bundesbank," Money Macro and Finance (MMF) Research Group Conference 2003 55, Money Macro and Finance Research Group.
    3. Leinonen, Harry, 1998. "Interbank funds transfer systems: liquidity needs, counterparty risks and collateral," Research Discussion Papers 16/1998, Bank of Finland.
    4. Ayuso, Juan & Repullo, Rafael, 2000. "A Model of the Open Market Operations of the European Central Bank," CEPR Discussion Papers 2605, C.E.P.R. Discussion Papers.
    5. 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.
    6. Nautz, Dieter & Oechssler, Jörg, 1999. "The repo auctions of the European Central Bank and the vanishing quota puzzle," SFB 373 Discussion Papers 1999,79, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    7. Kjell G. Nyborg & Ulrich Bindseil & Ilya A. Strebulaev, 2005. "Bidding and Performance in Repo Auctions: Evidence from ECB Open Market Operations," Working Papers 2005.92, Fondazione Eni Enrico Mattei.
    8. Välimäki, Tuomas, 2002. "Variable rate liquidity tenders," Research Discussion Papers 24/2002, Bank of Finland.
    9. Xavier Freixas, 2005. "Interbank Market Integration under Asymmetric Information," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 459-490.
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