From the onset of the crisis in the summer of 2007, we could see that widening spreads in interbank funding markets were putting upward pressure on the interest rates paid and charged by banks. To combat the strains in these markets, the Federal Reserve provided credit to banks on more generous terms and at longer maturities than usual.
The Securities Markets Programme (SMP) is a non-standard measure that the Governing Council decided on in order to help restore a more correct monetary policy transmission mechanism at a time when we are observing major disruptions to markets or segments of markets. Since the start of the crisis in 2007 we have applied a strict “separation of principles” between the two categories of measures.