FRANKFURT (Reuters) – The European Central Bank’s steady reduction of its balance sheet is starting to have measurable impact on some financial markets, easing stress in some areas and rekindling activity elsewhere, ECB board member Isabel Schnabel said on Thursday.
The ECB’s reduced footprint in the market, along with large debt issuance by euro zone countries, has eased the scarcity of collateral needed by financial market players, allowing for a gradual normalisation of repo market rates from extreme conditions, Schnabel told a conference.
“As excess liquidity has declined, we have seen a notable pick-up in market-based funding activity, which has also contributed to reserves circulating from banks with abundant liquidity to those with less liquidity,” Schnabel added.
(Reporting by Balazs Koranyi; Editing by Gareth Jones)
