1 Interest-rate reductions may not be very effective, however, during times of extreme stress when conventional channels of monetary-policy transmission are blocked or impaired. In the aftermath of the collapse of Lehman Brothers, financial markets froze and credit intermediation collapsed. Uncertainty pervaded the markets, counterparties were viewed with suspicion, and the flow of credit all-but halted.
In these circumstances, the ECB undertook a number of non-standard measures to enhance the flow of credit and support the functioning of the money market. Our approach consists of five broad elements. •  First, the full accommodation of banks’ liquidity needs at a fixed rate. •  Second, the expansion of the list of assets used as collateral.