Free Trial

MNI BRIEF: PEPP, TLTROs Supported NBFIs During Covid - Study

(MNI) LONDON
(MNI) London

Money market funds with larger shares of assets later eligible for inclusion in the ECB’s pandemic emergency purchase programme (PEPP) in their portfolios experienced significantly lower outflows and performed better during the Covid pandemic than otherwise comparable non-bank financial intermediaries, a research bulletin published Thursday concludes.

Despite not being directly eligible for lender of last resort interventions by the central banks, non-banks holding high-quality assets were able to benefit from asset purchases through banks’ repo lending. Those banks that took advantage in March 2020 of the ECB’s pandemic-specific targeted long-term refinancing operations (TLTROs) were up to five times more likely to pass on central bank liquidity to non-banks.

But the study's authors concluded, "central bank interventions to preserve market functioning should be a last resort and not a substitute for the private sector self-insuring against liquidity risk, e.g., by means of appropriate holdings of liquid assets" - echoing recent central bank financial stability concerns linked to potential vulnerabilities within the non-bank sector.

MNI London Bureau | +44 20 3983 7894 | luke.heighton@marketnews.com
True
MNI London Bureau | +44 20 3983 7894 | luke.heighton@marketnews.com
True

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.