ECB: A new deposit facility? - Rabobank

Analysts at Rabobank believe the ECB may need to act in the foreseeable future to ensure that certain markets will be able to continue to operate normally and one potential solution to address the diminished functioning of these markets is to open up the ECB’s deposit facility to asset managers and/or other financial institutions.

Key Quotes

“Allowing a broader range of counterparties to deposit excess funds at the ECB could help reduce the stress in the markets for short-term bonds.”

“We believe there are no insurmountable legal hurdles in doing so and the design of the facility can be adjusted to address unwanted side effects such as ‘unfair’ competition.”

“More crucially, we would also argue that such a facility may support the full implementation and effective transmission of the ECB’s monetary policy to other markets.”