Funding liquidity problems continue to bring pressure on the major banks’ operations. While the conditions have improved substantially in most funding segments throughout 2009, including the money markets, some of these institutions and parts of the broader euro area banking system, remain reliant on temporary support measures extended by the Eurosystem and governments. Box 11 summarises the government measures to support the banking sector and discusses their implications for fiscal balances. Regarding the implementation of the measures, several conclusions can be drawn: First, the take-up rate has been generally low across all measures, but there are substantial variations: the use of recapitalisation measures has been relatively widespread, while the take-up rate for the issuance of bank bonds with government guarantees has been considerably lower than expected. Second, the largest part of the financial support has been provided to a relatively small number of institutions (See Chart 12). Indeed, about half of the extended support has been absorbed by the largest three recipient institutions in each category of support. The various measures to support the financial sector amount to considerable actual and contingent liabilities for euro area governments. Although they are expected to have only a small direct impact on government deficits in the short to medium term, potential fiscal risks in the form of higher refinancing costs are sizeable for all countries that have provided significant financial system support, as these measures seem to have had a negative effect on market perceptions of the creditworthiness of the respective governments.
18 18  1.2 17  17 Jul. 18 18  (f) Forecast. Source: Bloomberg. Figure 6 MPR expected by the market  Interest rate differential between the US and Germany and multilateral dollar  (at December of each year, percent)  (basis points; index)  3  3  330  June MP Report 2 Fed fund  2 March MP Report  95  2 years  310  94  290  93  270 1  1  Libor  250  0  0  -1  -1 12  14  91  230  10 years  210  Euribor 10  92 DXY (right axis)  16  18  20  190 01.18 18  Source: Bloomberg. 10  90 89 88  03.18 Mar. 05.18 May  Figure 7 Nominal exchange rate and multilateral measures (1)  Parities against the US dollar (1) (2)  (index, 2017-2018=100)  (index, 2017-2018=100)  110  110 120  120  105  105 110  Latam currencies 110 (3)  MER-5 100  100 100  100  MER 95  95  90  90  80  Commodity currencies (4)  Chile  90  TCN 90 17  17 Jul. 18  80 17  17 Jul. 18 18  (1) Dashed vertical line shows statistical cutoff date of March 2018 Monetary Policy Report. (2) Uses April 2018 WEO weights. An increase denotes a depreciation of the currency with respect to US dollar.