In order to alleviate the tensions arising from the sovereign debt crisis, banks were also offered exceptionally long (3 years) longer-term refinancing operations (LTROs) in December 2011 and March 2012. To ensure the availability of liquidity, the range of collateral eligible in the ECB’s credit operations was also expanded.
The Eurosystem applies haircuts in the valuation of collateral, so as to manage the credit risk inherent in collateral policy. As the euro area crisis protracted, the fifth stage of the crisis – the European confidence crisis – began in summer 2012, as nervousness in the sovereign bond markets culminated and fell even upon large euro area countries, namely Spain and Italy.