Weekly publication of estimates of average liquidity factors

5 March 2004

Since June 2000, the European Central Bank (ECB) has published a forecast of the average autonomous liquidity factors each time a main refinancing operation (MRO) is announced. Autonomous factors comprise those items on the consolidated balance sheet of the Eurosystem that are normally not related to monetary policy operations, but that still affect the liquidity position, i.e. the current account holdings of the credit institutions vis-à-vis the Eurosystem. The purpose of publishing a forecast of the average autonomous liquidity factors is to provide useful information for the counterparties when bidding in the MROs and to help them better assess the actual amount allotted by the ECB. Specifically, the forecast can be used by market participants to calculate the benchmark allotment, which is the allotment amount which allows counterparties to smoothly fulfil their reserve requirements in the period up to the day preceding the settlement of the subsequent MRO.[1]

However, when making the actual allotment decision in an MRO, which normally occurs one day after it has been announced, the ECB takes into account its updated forecast of the autonomous liquidity factors on the allotment day, which is usually slightly different from the forecast published the day before. In order to prevent these revisions from leading to incorrect assessments of the ECB’s allotment decisions, from 8 March 2004 onwards, the ECB will also publish its updated forecast of the average autonomous liquidity factors as at the allotment day.

In addition, on both the day on which an MRO is announced and the day on which it is allotted, the ECB will publish its calculation of the benchmark allotment in the relevant MRO, taking into account its complete forecast of credit institutions’ liquidity needs. This includes the published forecast of the average autonomous liquidity factors as well as an estimate of the liquidity needs stemming from excess reserves, which are credit institutions’ current account holdings in excess of their required reserves.

The above information will be provided via newswire services, together with the MRO announcement, at around 3.30 p.m. on the announcement day, while the updated figures, will be provided on the allotment day together with the ECB’s allotment decision, between 11.15 a.m. and 11.20 a.m.

Finally, we should like to remind you that the changes to the Eurosystem’s operational framework approved by the Governing Council in January 2003, will be implemented next week.[2] This means that the first maintenance period – defined fully in accordance with the amended framework – will begin on 10 March 2004, and the first MRO with a one-week maturity will be allotted on 9 March 2004. Thus the change in the weekly publications of liquidity conditions will coincide with the changes to the operational framework.

[1] See the article entitled “The liquidity management of the ECB” which appeared in the May 2002 issue of the ECB’s Monthly Bulletin and the box entitled “Autonomous liquidity factors in the euro area and the use of the forecasts of liquidity needs provided by the ECB” which appeared on page 14 of the July 2001 issue.

[2] See the article entitled “Changes to the Eurosystem’s operational framework for monetary policy” which appeared in the August 2003 issue of the ECB’s Monthly Bulletin.

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