In the first phase of the crisis, marked by the collapse of Lehman Brothers, the balance sheet was used together with the short‐term interest rate as a way to offset impairments in the monetary policy transmission mechanism. For example, lending rates in some countries did not respond to cuts in short‐term rates, as interbank markets dried up and became segregated along national lines.
The ECB responded to the emerging liquidity shortage by providing ample liquidity, at increasingly long durations and against a wider range of collateral. As of 2014, the nature of balance sheet policies changed. The euro area had entered a prolonged downturn as banks in large parts of the euro area further reduced lending.