The ECB’s liquidity interventions were also accompanied by an intensification of its communication policy. A key objective of communication efforts was to reassure market participants and the public at large about the ECB’s full awareness of the severe deterioration of liquidity conditions in money markets and its preparedness to act in order to preserve orderly conditions in money markets.
The correct question, in my view, is what form this deleveraging should take, and at what speed it should be allowed, or encouraged, to take place. Clearly, we do not want any excessively rapid deleveraging that involves disorderly fire sales of assets. This is why two years ago, in the context of a bank funding squeeze, the ECB implemented longer-term refinancing operations.