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EURO MONE Y MAR KE T STUDY 20 08
F E B R U A RY 20 0 9
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© European Central Bank, 2009 Address Kaiserstrasse 29 60311 Frankfurt am Main Germany Postal address Postfach 16 03 19 60066 Frankfurt am Main Germany Telephone +49 69 1344 0 Websitehttp://www.ecb.europa.eu Fax +49 69 1344 6000 All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. ISSN 1830-3781 (online)
EXECUTIVE SUMMARY 1 INTRODUCTION 2 THE MONETARY POLICY ENVIRONMENT IN 2007 AND 2008 3 THE UNSECURED MARKET 3.1 Turnover analysis 3.2 Maturity analysis 3.3 Market structure 4 THE SECUREDMARKET 4.1 Turnover analysis 4.2 Maturity analysis 4.3 Market structure 4.4 Triparty repos 5 DEVELOPMENTS IN OTC DERIVATIVES MARKETS 5.1 Turnover analysis 5.2 Maturity analysis 5.3 Market structure 6 DEVELOPMENTS IN THE SHORT-TERM INTEREST RATE FUTURES AND OPTIONS MARKETS 7 THE SHORT-TERM SECURITIES MARKET 7.1 Turnover analysis in the secondary market 7.2 Outstanding amounts and issuance 7.3 Marketstructure 8 CROSS-MARKET SEGMENT ANALYSIS 8.1 Turnover analysis 8.2 Maturity analysis 8.3 Market structure 4 6 BOXES 1 The ﬁnancial market turmoil 2 Euro money market reference rates 3 The e-Mid electronic trading platform 4 Evolution of the use of collateral in ECB monetary policy operations 5 Euro GC Pooling development during the ﬁnancial market turbulence 6 A decomposition of Euribor spreads7 Asset-backed commercial paper: a market segment severely affected by the turmoil 8 The euro money market in non-euro area Member States ANNEXES Annex 1: Technical annex Annex 2: Euro money market reference rates Annex 3: A comparison of the European Repo Council (ERC) survey and the ECB survey on euro interbank money market activity Annex 4: Glossary Annex 5: Banks participating in the studyAnnex 6: Coordination of the 2008 ECB euro money market study 7 10 16 21
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ECB Euro money market study 2008 February 2009
EXECUTIVE SUMMARY This seventh study on the structure and functioning of the euro money market is the result of a survey conducted by theEuropean Central Bank (ECB) and the national central banks that are members of the European System of Central Banks (ESCB).1 The survey asked panel banks (listed in Annex 5) to indicate their average daily turnover in various money market instruments during the second quarter of 2008 and to answer a number of qualitative questions. In this study two changes were introduced compared to previousones: the coverage of the survey was extended from 23 to 26 countries and additional procedures were put in place to enhance the quality of the data and to better assess the impact of the ﬁnancial market turbulence that started in 2007 on the euro money market. The main ﬁndings of the study indicate that the euro money market was not spared from the ﬁnancial market turbulence, whose repercussionscould be observed in various euro money market segments. Overall turnover in the euro money market decreased in the second quarter of 2008, for the ﬁrst time since 2004, by around 5% year-on-year, after the strong year-on-year growth recorded in 2006 and the slight increase observed in 2007. The most notable decrease in activity took place in secured deposits (also referred to as “repos” in thisstudy) (-16%), unsecured deposits (-13%) and overnight index swaps (-32%). The fall in the activity in the secured and unsecured deposit segments resulted from tight and volatile market conditions that fuelled counterparty credit concerns on one hand and, on the other hand, put pressure on banks to reduce their credit, market and liquidity risk exposures. Despite this decline in overall turnover,...