BIS Review 2/2004  1  At the same time, the growth of loans to the private sector has been rising over recent months, benefiting from the low level of interest rates and the general improvement in the economic environment. In our view, the accumulation of excess liquidity should not be of concern for price stability as long as the economic recovery is gradual.
To see this, recall that the tail risks that OMTs seek to address distort financial prices and quantities in both the core and the periphery. Tail risks generate a glut of liquidity in core banking systems, as monetary assets are relocated by panicking investors from fragile countries to safe-havens.