Open market operations

The Eurosystem usually uses open market operations to control the required amount of liquidity and to signal money-market interest rates. Open market operations are initiated by the Eurosystem. Five types of instrument are available:

  • reverse transactions in the form of collateralised loans or repo transactions, 
  • outright transactions, where the Eurosystem purchases/sells financial assets, usually securities, outright, 
  • issuance of ECB debt certificates, 
  • foreign exchange swaps, 
  • collection of fixed-term deposits from banks. 

These instruments may be executed trough various tenders, or trough bilateral procedures. 

In terms of aim, regularity and procedure of open market operations are divided into four categories:

Main refinancing operations are the Eurosystem’s most important form of monetary policy lending under normal circumstances. They are executed once a week, with a maturity of (normally) one week (calendar of tenders). The minimum bid rate on these operations is the ECB’s key interest rate. 

Longer-term refinancing operations are additional longer-term loans. They are executed once a month, with a maturity of three months (calendar of tenders).When executing these operations the Eurosystem does not set a minimum bid rate. As of 2009 the Eurosystem’s non-standard measures have included longer-term refinancing operations with a different maturity and interest rate. 

Fine-tuning operations are executed on an ad hoc basis when required to manage liquidity and to steer interest rates over the short term. They are primarily executed as reverse transactions (loans) and fixed-term deposits, but may also take the form of foreign exchange swaps.  

Structural operations are used by the Eurosystem when it wishes to adjust the structural position of the money market. They include the issuance of ECB debt certificates, reverse transactions and outright transactions.