I expect from financial institutions – both insurers and banks – an exemplary participation in this fight. I know that they fully agree to the principle, but they must now carry it through in their daily management; it is in your interest as compliance risk has become as vital, as strategic, as credit risk. May your institutions be strong on both fronts; may our country be as involved in the economic battle as in the fight against terrorism, with the contribution of all of us; and may each one of you remain vigilant and active, yet as serene as possible in 2016. Thank you for your attention. BIS central bankers’ speeches  3
Yields of shorter-term notes and bills have declined, with two-year government bond yields of Italy, Ireland and Portugal declining by over 400 bps since 8 December 2011. Longer-term government yields have declined as well, although not to the same extent as shorter-term yields (Slide 7). The positive secondary market developments were accompanied by favourable primary market activity with sustained demand in auctions of T-bills and shorter bonds in several euro area countries. All in all, there is now strong preliminary evidence that the three-year LTROs have helped the banks to reduce liquidity risk and therefore allowed them to smooth the deleveraging process over a longer period of time and maintain exposures to SMEs – at least in some cases. Anecdotal evidence also points to the return of some institutional money market investors, with quite a number of banks reporting that funds (also unsecured) are becoming available again at somewhat longer maturities. While banks seem to have used the funds obtained from the first three-year LTRO mainly for refinancing purposes, when looking forward to the next six months, they now seem to expect a stronger use of these funds for granting loans. Whether these expectations will materialise remains an open question and the Governing Council will closely monitor these developments. Challenges ahead A side effect of the three-year LTROs is that the banking system in the euro area is now in a situation of abundant excess liquidity.