Open Market Operations

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Eurosystem Monetary Policy Instruments

In order to achieve its objectives, the Eurosystem has at its disposal a set of monetary policy instruments: it conducts open market operations, offers standing facilities and requires credit institutions to hold minimum reserves on accounts with the Eurosystem. These operations have to be conducted with eligible counterparties.

Open Market Operations

Open market operations serve the purpose of steering interest rates, managing the liquidity situation in the market and signalling the stance of monetary policy. Five types of instruments are available to the Eurosystem for the conduct of open market operations, namely the reverse transaction applicable on the basis of repurchase agreements or collateralised loans, outright transactions, the issuance of debt certificates, foreign exchange swaps and the collection of fixed-term deposits.  Open market operations are initiated by the ECB, which also decides on the instrument to be used and on the terms and conditions for its execution. They can be executed on the basis of standard tenders, quick tenders or bilateral procedures.

The Eurosystem's open market operations may be divided into the following categories:

• The main refinancing operations are regular liquidity-providing reverse transactions with a weekly frequency and a maturity of normally one week. These operations are executed by NCBs on the basis of standard tenders. Marketable and non-marketable assets are eligible as underlying assets. These operations provide the bulk of refinancing to the financial sector.
• The longer-term refinancing operations are liquidity-providing reverse transactions with a monthly frequency and a maturity of normally three months. These operations are aimed at providing counterparties with additional longer-term refinancing and are executed by NCBs on the basis of standard tenders. Marketable and non-marketable assets are eligible as underlying assets. In these operations the Eurosystem normally acts as a rate taker.
• Fine-tuning operations are executed on an ad hoc basis with the aim of managing the liquidity situation (liquidity injection/absorption) in the market and steering interest rates, in particular in order to smooth the effects on interest rates caused by unexpected liquidity fluctuations in the market. Fine-tuning operations are primarily executed as reverse transactions, but can also take the form of either foreign exchange swaps or the collection of fixed-term deposits. Fine-tuning operations are normally executed by NCBs through quick tenders or bilateral procedures. Marketable and non-marketable assets are eligible as underlying assets. The Governing Council of the ECB can decide whether, under exceptional circumstances, fine-tuning bilateral operations may be executed by the ECB itself.

      Fine-tuning operations may be conducted on the last day of a reserve maintenance period
      to counter liquidity  imbalances which may have  accumulated  since the  allotment of the
      last main refinancing operation.

• In addition, the Eurosystem may carry out structural operations through the issuance of debt certificates, reverse transactions and outright transactions. These operations are executed whenever the ECB wishes to adjust the structural position of the Eurosystem vis-à-vis the financial sector, both on a regular or non-regular basis. Only marketable assets are used as underlying assets in outright transactions. Structural operations in the form of reverse transactions and the issuance of debt instruments are carried out by NCBs through standard tenders. Structural operations in the form of outright transactions are executed through bilateral procedures.

Next navigation level

• The Monetary Policy Framework
  • Open Market Operations
  • Standing facilities
  • Minimum reserves
• Eligible assets
• List of correspondent banks for commercial payments
• Contacts
• Financial markets - Archive