Both would point to a declining liquidity dependence. Figure 6: Central bank reserves and credit lines of banks in Germany  Figure 7: Credit lines relative to a bank’s total assets  Going forward, monitoring the liquidity situation of financial institutions is central to our macroprudential surveillance.
From the U.S. experience, we know that market reactions to a withdrawal of liquidity may be quite abrupt. A severe stress episode in September 2019 forced the Fed (Federal Reserve System) to pause its first period of quantitative tightening. [19] The stress quickly faded when quantitative tightening stopped, and volatility declined as asset purchases resumed.