Financial Markets and Institutions (2-downloads)

operations, which are a much smaller source of liquidity for the euro-area bank-

ing system and are similar to the Fed’s outright purchases or sales of securities. These

operations are carried out monthly and typically involve purchases or sales of secu-

rities with a maturity of three months. They are not used for signaling the mone-

tary policy stance, but instead are aimed at providing euro-area banks with additional

longer-term refinancing.

Lending to Banks

As for the Fed, the next most important tool of monetary policy for the European

Central Bank involves lending to banking institutions, which is carried out by the

national central banks, just as discount lending is performed by the individual Federal

Reserve Banks. This lending takes place through a standing lending facility called the