This added degree of comfort has encouraged market activity at decreasing term lending rates. But I do not want to imply that the approach that the ECB has followed thus far is free of pitfalls. For instance, the use of refinancing operations with a very long maturity results in an immediate expansion of the balance sheet when implemented.
For example, as part of their financial stability mandates, central banks monitor the financial system – be it bank-based or market-based – to see if it provides sufficiently stable funding for real economic activities. And much like central banks, development banks also reflect on the appropriate balance between funding via banks and funding via the capital markets. 2.