ABU DHABI (MNI) – The measures the European Central Bank has taken
just in the past two months have started to have a positive effect, ECB
President Mario Draghi said Thursday.

Speaking at a press conference on the margins of a seminar of
Eurosystem and Gulf country central banks, Draghi was asked if the ECB
had done enough to counter the crisis. He rattled off a litany of the
efforts undertaken by the central bank since he took the helm on
November 1. “On the ECB…let me remind you what we have done in just
two months. We have cut rates twice, we have halved the minimum required
reserve requirement ratio from 2% to 1%,” he said.

“Besides the normal refinancing facilities, we have launched the
first three-year LTRO, which has provided unlimited liquidity to banks
at the prevailing … current short-term interest rate of 1%,” he
continued. “We’ve also broadened the collateral rules, so that even
banks that previously had difficulty accessing the ECB liquidity
facility, now can access these facilities. And we’ve done other measures
as well.”

Draghi added: “We start seeing the outcomes and the benefits of
these measures. We see that for example the senior unsecured bond
market, which had been shut for many, many months, has issued in the
last three weeks more than the previous six months altogether. There is
a sense that some interbank markets are reopening, even though not the
interbank market as such. So we see encouraging signs.”

The banks that access the ECB’s facilities, he noted, are “by and
large” not those institutions that re-deposit funds in the central
bank’s deposit facility, which means the money borrowed in the bank’s
refinancing operations is entering the economy “in one way and another.”

Moreover, he affirmed, “we’ve seen a dramatic fall in short-term
yields on many sovereign debts,” while the longer-term part of the yield
curve is now also beginning to show a decline.

The ECB has thus averted “a serious funding crisis that European
banks might have seen,” Draghi asserted, also reminding of governments’
“huge financing needs” in 1Q.

As for the next three-year LTRO at end-February, it is up to the
banks to determine the size, Draghi said, though he later predicted that
for a “variety of reasons” the take-up then would probably be “quite
high” as well.

In other comments, Draghi said that the GCC countries are “very
important partners for Europe in a variety of ways.” He did not address
the possibility that these relatively flush governments would help
Europe counter the crisis. “They’ve been partners of Europe for a long
time for both oil but also non-oil trade. So they are, they remain and
they will be an important partner,” the ECB chief said.

–Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

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