In addition, risk management tools are applied to ensure protection of the Eurosystem against credit risk. The wide range of eligible assets proved to be extremely valuable in recent years, when markets for certain types of security became very illiquid, but banks continued to refinance themselves via the Eurosystem.
As discussed before, the liquidity coverage ratio is supposed to induce banks to hold more liquid assets. One way for banks to boost their ratio is to keep their most liquid assets on their balance sheets, and to pledge the more illiquid ones as collateral in ECB liquidity-supply  9  See European Central Bank, Annual Report 2009, p. 102.