The first main refinancing operation of the Eurosystem

On 4 January the Eurosystem announced its first main refinancing operation, which was successfully completed today. The operation has a duration of 13 days, from 7 to 20 January 1999.

The main refinancing operation was conducted by means of reverse transactions at a fixed rate of 3%, which was pre-announced on 22 December 1998 by the ECB Governing Council. A total of 944 banks participated in the operation and submitted bids to the national central banks for an amount of EUR 482 billion. The total amount of liquidity allocated to the banking system amounted to EUR 75 billion, resulting in an allotment quota of 15.57%.

In arriving at the allotment decision, it was considered that credit institutions had accumulated a significant minimum reserve deficit in the first days of Stage Three. The decision to allot EUR 75 billion aims at providing sufficient liquidity to allow credit institutions (on aggregate) to neutralise, relatively soon within the first maintenance period, this reserve deficit. In arriving at the allotment decision, it was also taken into account that a total of EUR 185.1 billion of liquidity-providing monetary policy operations conducted by the national central banks in Stage Two will mature in the first weeks of Stage Three. Of this amount, approximately EUR 75 billion will mature on 7 January 1999 (i.e. the settlement day of today's main refinancing operation). The allotment volume decided today also reflects the expected evolution of autonomous liquidity factors, such as the circulation of banknotes, which are anticipated to provide additional liquidity to the market.

The decision has been taken on the basis of an analysis of liquidity conditions in the whole euro area while paying due attention to the uncertainties connected to the phasing-in of the new system.