ECB/Schnabel: Balance Sheet Reduction Begins to Have Measurable Impact on Certain Financial Markets

Forex - ECB Governing Council member Isabel Schnabel stated that the European Central Bank's consistent reduction of its balance sheet has begun to have measurable effects on some financial markets, alleviating stress in certain areas and reviving activity elsewhere. Schnabel noted that, in addition to reducing the ECB's footprint in the market, the significant issuance of debt by Eurozone countries has eased the collateral scarcity that financial market players needed and facilitated the gradual normalization of repo market rates from extreme conditions. Schnabel said, “As excess liquidity decreases, we have seen a notable increase in market-based funding activities, contributing to the flow of reserves from banks with ample liquidity to those with less.”