Also, in addition to the ABSs that were already eligible for Eurosystem operations, the ECB would accept as eligible collateral ABSs with a second best rating at issuance and over the lifetime of A- or above, the underlying assets of which comprise residential mortgages and loans to SMEs. Additional credit claims not complying with the regular minimum credit quality threshold applied to collateral eligible for Eurosystem credit operations are subject to increased haircuts to aim at achieving risk equivalence with the regular set of eligible collateral. The Eurosystem allotted € billion with the first three-year LTRO on 21 December 2011. Accounting for other operations that matured and settled within that week, however, the net liquidity increase was € billion. In the second three-year LTRO, on 29 February, the Eurosystem provided credit institutions with an additional gross amount of € billion. Again, taking into account maturing operations, the net liquidity injection was around € billion. Counterparties bidding in the three-year LTROs can be divided into two groups: one group consists of many small banks, bidding for comparatively small amounts, while the other group comprises large banks and accounts for the main share of the overall allotment amount. A distinctive feature of the second operation was the higher number of bidders, 800, as opposed to 523 in the first operation. The majority of bidders in the second LTRO were small banks from euro area countries where the economic conditions are stronger, with more than half of the bidders bidding for € million or less.
At some point, as global economic activity begins to recover, we will again need to act to restrain the growth of domestic demand, but that is a problem for the future. Given the present international economic environment, and given the present advanced stage of our own economic cycle, if the outturn over the next couple of years is anything close to this – that is about the best we can realistically hope for. 7  BIS Review 19/1999