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ECB To Add More Liquidity In The Euro Banking System Through 2008

September 29, 2008 6:07 a.m. EST

AHN Staff

Frankfurt, Germany (AHN) - The Governing Council of the European Central Bank (ECB) has decided to infuse additional liquidity to the financial firms in the region through the rest of the year.

The region's central bank said it will provide funds by holding "special" auctions designed to raise funds available to commercial banks through short term rates, which will be close to the minimum bid rate or official 4.25 percent target

The Frankfurt-based European Central Bank (ECB) decided to conduct a special term refinancing operation aimed to improve the overall liquidity position of the euro area banking system.

According to ECB, the operation will be launched on Monday through a standard tender procedure, using a variable rate tender with no pre-set amount. It is expected to settle on September 30 and will mature on November 7, 2008.

"The special term refinancing operation will be renewed at least until beyond the end of the year," the bank said in a statement released on Monday.

The world's largest central banks are forced to infuse capital into the money market as over $550 billion have reported in mortgage-related writedowns caused by the U.S. subprime contagion.

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