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19 Apr 2013
Forex Flash: ECB Balance sheet is shrinking - BTMU
FXstreet.com (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts note that the ECB balance sheet is continuing to shrink.
The see that the still ongoing repayment of three year LTRO funds by European banks is leading to a gradual tightening in Eurozone monetary conditions as excess liquidity is withdrawn and the ECB´s balance sheet shrinks, although Eurozone short rates remain anchored. They see that the ECB’s balance sheet has declined to EUR2.64 trillion from a peak of 3.1 trillion in June 2012 and European banks have so far repaid a total of EUR263.5 billion of three-year LTRO funds leaving EUR755.2 billion of funds still outstanding. They write. “As a result excess liquidity (open market operations less autonomous factors less net reserve requirements) in the system has declined from close to EUR600 billion in mid-January to a current estimate of around EUR380 billion.”
The see that the still ongoing repayment of three year LTRO funds by European banks is leading to a gradual tightening in Eurozone monetary conditions as excess liquidity is withdrawn and the ECB´s balance sheet shrinks, although Eurozone short rates remain anchored. They see that the ECB’s balance sheet has declined to EUR2.64 trillion from a peak of 3.1 trillion in June 2012 and European banks have so far repaid a total of EUR263.5 billion of three-year LTRO funds leaving EUR755.2 billion of funds still outstanding. They write. “As a result excess liquidity (open market operations less autonomous factors less net reserve requirements) in the system has declined from close to EUR600 billion in mid-January to a current estimate of around EUR380 billion.”