Brussels, 03/07/2014 (Agence Europe) - In normal circumstances, from 1 January 2015 onwards, the European Central Bank Governing Council will meet every six weeks (rather than monthly) and will publish “accounts of its monetary policy discussions”.
This means that reserve maintenance periods will be extended to six weeks to match the new scheduled.
ECB President Mario Draghi acknowledged on Thursday 3 July that the decision to reduce the frequency of the governing council meetings from four to six weeks was taken with an eye on the rotation period that will be introduced in the ECB's decision-making process when Lithuania joins the eurozone on 1 January 2015 (see EUROPE 11105).
There are a number of advantages of having six-week cycles. It will avoid creating confusion about monetary expectations and leave enough time to produce minutes of the governing council meetings. Draghi said the ECB should not and must not take decisions every month.
Over the next six months, the ECB will decide on what should be included in minutes of ECB meetings, explained Draghi, such as whether they should list all the proposals submitted to the governing council and whether names should be added.
A month after changing some of the euro interest rates, the ECB decided on Thursday that the main refinancing rate, marginal loan facility and marginal deposit facility would remain unchanged at 0.15%, 0.40% and -0.10% respectively (see EUROPE 11095). It pointed out that rates would remain low for an extended period due to stubbornly low inflation.
Details of TLTRO operations. The ECB gave details on Thursday of the targeted long-term refinancing operations (TLTRO) to provide loans to banks to boost the level of inflation (which stood at 0.5% in June, according to Eurostat figures) to the bank's medium-term target of just below 2%. Draghi said up to €1 trillion would be available for the banks and they would be able to subscribe individually or in groups. The first TLTRO will be in September 2014 and the second in December 2014. Under the scheme, banks will initially be able to borrow up to 7% of a specific part of their loans in September and December 2014 (lending to non-financial bodies and mortgage lending will not be included in the calculation). Beneficiary banks will have to pay back the loans if they cannot prove that they are providing more lending to the real economy.
Quizzed about quantitative easing to buy up private and public bonds if the current measures do not do enough to drive inflation up, Draghi recommended investing in a bond market based on “simple” ABS (asset-backed securities), like the European market before the financial crisis. In other words, a transparent market that does not include derivatives, in order to ease the pricing process. (MB)