Discussion in 'Economics' started by ASusilovic, Jun 15, 2010.
What are you saying they are making emergency liquidity action?
Does that indicate people are taking money out of their accounts or that the reserves are very low?
Surely this means deposits are low and need capital?
If they are having to take advantage of emergency borrowing. It means they need money to cover low reserves. That would mean they have lent too much out or they are having more taken out. In short people are taking money out of the banks.
This, in all likelihood, means nothing, apart from the fact that there's a large (â¬442bn) operation maturing on Jul 1st. Banks are simply getting ready for the rolloff.
Was I right in my assumption though. If that was not the case (the above) it would indicate they are having to cover a lack of reserves, which would be due to the expected withdrawals being exceeded.
A present for your answer.
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I am not entirely sure what you're saying...
Basically a large amount of money on deposit at the central bank (Fed, ECB, etc) means to me, on the supply side, a high degree of risk-aversion in the banking system, and/or a low demand for credit in the real economy. That would be my interpretation during normal times, but, as I mentioned, we're approaching a large mkt operation and I am not inclined to read too much into the excess use of the ECB deposit facility.
Sorry I think I have misread the post. I thought it meant the banks were borrowing more in the short term to cover deposits. It is the other way round the ECB is holding more. I think it is due to the link not showing this information and instead showing the ECB explanation of the marginal lending facility. That made me think the banks were borrow the money, thus due to deposits.
Did you like your present?
I haven't unwrapped it, so to speak, as I am afraid it's likely to be NSFW...
Thank you, though, I am sure I will enjoy it, in the privacy of my home.
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