Banks will be able to refinance term lending with the Eurosystem and thus preserve their long-term exposures to the real economy. After the first year, banks will have the option to terminate the operation. So they can flexibly adapt to changing liquidity conditions and a normalising market environment.
Indeed, perhaps one of the most striking features of the international financial system is the size of official reserve assets that have been accumulated by what Hogan and Pearce would have labelled “Surplusia” – the countries that have run persistent current account surpluses.