Rather, the prices also incorporate the value of expected supervisory and regulatory actions should their financial condition deteriorate. These perceptions and levels of government guarantee vary substantially across firms. For example, the corrective actions used by bank supervisors to deal with undercapitalized banks are intended to encourage market discipline and to deter the expectation of regulatory forbearance.
Based on current holdings of excess liquidity, the current calibration will entail annual savings for banks of about € billion. Second, it leaves the volume of non-exempt excess liquidity which is still remunerated at the deposit facility rate at a level which is sufficiently large to ensure that money market rates remain anchored to the ECB deposit facility rate.