Second, because losses in a tail event are much more likely to be correlated for firms deeply engaged in trading, structured products, and other capital market instruments, all such firms are vulnerable to accelerating losses as troubled firms sell their assets into a declining market. Enhanced capital requirements should take into account these costs.
Moreover, the experience we accumulated during the first phase helped us in designing measures aimed at providing abundant liquidity, while avoiding stigma effects. The ECB conducted two three-year lending operations indexed to the MRO (in December 2011 and February 2012). The operations were aimed at alleviating adverse funding conditions for banks by allowing them to satisfy their additional liquidity needs.