- "Central bank balance sheets have grown significantly throughout the financial crisis. The Fed’s has nearly tripled, while it more than doubled in the UK and almost doubled in the euro area. But discrepancies are emerging."
- "Whereas the Fed made a pro-active decision this month to effectively maintain the size of its balance sheet, the ECB’s balance sheet has shrunk recently. In large part that’s because the architecture of the ECB’s unconventional measures means that these shrink the balance sheet when they are allowed to run their course. And that’s exactly what happened when the 12-month LTRO rolled off a couple of months ago."
- "That reduction in the balance sheet has been associated with a small rise in short-term interest rates. So in effect the ECB is very marginally tightening inasmuch as it has not made a pro-active decision not to do so. Although the ECB is likely to maintain the current provision of liquidity into the new year, a gradual reversion back to variable-rate tenders in 2011, ahead of an increase in rates by the middle of the year, is possible."
- "In contrast to both the ECB and the Fed, the nature of the Bank of England’s quantitative easing programme means the MPC needs to make a conscious decision to reduce the size of its asset purchases and, consequently, its balance sheet. Such a decision still seems some way off."
- "But, one potential issue for the BoE’s balance sheet next year is the expiry of the Special Liquidity Scheme from April 2011, when over £200bn of assets will return to their originating banks (having been swapped for up to three years for Treasury bills). The SLS was an off-balance sheet operation for the BoE, but the Bank has already put in place the architecture to cope with greater demand for funding when the SLS expires. In particular, its new index-linked LTROs (for three and six months) can accept a broad range of collateral. Its
early operations suggest banks are prepared to pay up to refinance collateral that the market may still be unwilling to fund."
- "Whereas the Fed made a pro-active decision this month to effectively maintain the size of its balance sheet, the ECB’s balance sheet has shrunk recently. In large part that’s because the architecture of the ECB’s unconventional measures means that these shrink the balance sheet when they are allowed to run their course. And that’s exactly what happened when the 12-month LTRO rolled off a couple of months ago."
- "That reduction in the balance sheet has been associated with a small rise in short-term interest rates. So in effect the ECB is very marginally tightening inasmuch as it has not made a pro-active decision not to do so. Although the ECB is likely to maintain the current provision of liquidity into the new year, a gradual reversion back to variable-rate tenders in 2011, ahead of an increase in rates by the middle of the year, is possible."
- "In contrast to both the ECB and the Fed, the nature of the Bank of England’s quantitative easing programme means the MPC needs to make a conscious decision to reduce the size of its asset purchases and, consequently, its balance sheet. Such a decision still seems some way off."
- "But, one potential issue for the BoE’s balance sheet next year is the expiry of the Special Liquidity Scheme from April 2011, when over £200bn of assets will return to their originating banks (having been swapped for up to three years for Treasury bills). The SLS was an off-balance sheet operation for the BoE, but the Bank has already put in place the architecture to cope with greater demand for funding when the SLS expires. In particular, its new index-linked LTROs (for three and six months) can accept a broad range of collateral. Its
early operations suggest banks are prepared to pay up to refinance collateral that the market may still be unwilling to fund."
CreditSuisse European Economics 20100824
No comments:
Post a Comment