The downward trend of its interest rates until set at the current historical low of 0.05 percent. These rates favor, above all, commercial banking. However, the reduction did not have the effect expected by the ECB and was not transmitted to the real economy. There continues to be a serious problem of access to credit by small business owners and individuals.
The ECB decided to penalize banks that store money in the entity instead of putting it into circulation through loans or purchases of assets. Currently, the interest rate for the deposit facility is fixed at -0.20 percent. With this, it seeks to encourage the granting of credits.
MONEY INJECTIONS: At the end of 2011 and beginning of 2012 the BCE applied a line of credit for a volume of one billion euros. Long-term liquidity operations (LTRO) consisted of 3-year ECB loans www.adustyframe.com/2009/12/06/works-of-god-13 at a low-interest rate (0.15 percent) to avoid a collapse of the European banking system. The aim of the ECB was to get entities to grant loans to companies and families again, but it also did not have the desired effect. In 2014, the ECB again approved new injections of capital with a maturity until 2018 but conditioned on this occasion to the granting of credit to the real economy.
PURCHASE OF CREDIT PACKAGES: Since autumn (boreal) of 2014, the ECB buys covered bonds and asset-backed securities (ABS), that is, packages that group loans as loans to companies or car credits. It was a new attempt to lighten the balance sheets of the banks to allow them to concentrate on the granting of credit.
In May 2010, the ECB began for the first time with the purchase of state debt.
The so-called “Securities Markets Program” (SMP) had to stop the rise in the risk premium (the share that investors pay when taking the risk of buying bonds from a country with less economic reliability than another) of the countries with the most problems of the Eurozone. Until the beginning of 2012, the ECB bought state debt for about 220,000 million euros, the majority coming from Italy. In September 2012, this program was replaced by the one known as “
Direct Monetary Transactions” (OMT, for its acronym in English) that included a non-negotiable condition: the country that wanted to benefit from them had to first take advantage of a European rescue program and comply with the corresponding requirements of reforms and austerity. No country had to take that step. The mere announcement of the UNWTOs was enough to calm the minds of the markets at the tensest moment of the Euro-crisis. The legality of this program was questioned by Germany, but recently an opinion of the general counsel of the Court of Justice of the European Union established its legality.
QE: It is the last step taken today by the ECB president, Mario Draghi. It is a program known as quantitative easing or Quantitative Easing (QE) to buy public bonds and inject liquidity into the markets, following in the footsteps of the Federal Reserve, the Bank of England and the Bank of Japan. It consists of the purchase by the BCE of assets in the market, which it pays with new money that it issues, thus expanding the balance of both assets and liabilities. When you buy the assets your price rises and you lower the interest rates. It also introduces money into the financial system. Specifically, the ECB will buy public and private bonds for a monthly amount of 60,000 million euros until September 2016.