(2020), “The Importance of Being Special: Repo Markets during the Crisis”, Journal of Financial Economics, Vol. 137, No. 2, pp. 392-429. The conference paper by D’Amico and Pancost (2020) quantifies the link between special repo rates and various price anomalies in the US Treasury markets; see D’Amico, S and Pancost, N. A. (2020). “Special Repo Rates and the CrossSection of Bond Prices: the Role of the Special Collateral Risk Premium”, Working Paper. [22] For an analysis of scarcity effects and the role of securities lending, see, e.g., Arrata et al. (2020), op. cit. [23] In November 2020, the Eurosystem lowered its minimum securities lending fee from 10 to 5 bps for securities collateral and from DFR-30bps to DFR-20 bps for cash collateral transactions. [24] Private and public securities lending can act as substitutes. For example, Aggarwal, Bai and Laeven (2018) find that the possibility to borrow German sovereign bonds from the Eurosystem reduced the demand to borrow these bonds in the private repo and securities lending market; see Aggarwal, R., Bai, J. and Laeven, L. (2018), “The Role of Government Bond Lending Market in Collateral Transformation,” Working Paper. [25] Jank, S., Mönch, E., and M. Schneider (2019) “Safe Asset Shortage and Collateral Re-use”, Working Paper. [26] In principle, higher asset encumbrance due to the TLTROs may lead to greater collateral scarcity. However, this effect is expected to be negligible: as non-marketable securities are also eligible as collateral in the Eurosystem’s refinancing operations, the overlap with collateral used in market transactions is likely limited.

[28] In reaction to the COVID-19 pandemic, the ECB provided temporary regulatory relief to banks. The most relevant measures for money market functioning included the relaxation of the LCR requirement and the temporary exclusion of central bank reserve holdings from the leverage ratio. The relaxation of the LCR requirement enables banks to use their liquidity buffers under stress, even if this implies that their LCR falls below the required minimum level of 100%. This measure thus allows for more flexibility in banks’ liquidity management. The temporary exclusion of central bank reserve holdings from the leverage ratio alleviates bank balance sheet constraints and contributes to reducing the quarter-end effects in money markets. It also ensures that bank participation in monetary policy operations is not unduly affected by the regulatory requirements. [29] The introduction of these temporary regulatory relief measures is expected to support the functioning of money markets beyond the year-end. This also has positive ramifications for the smooth transmission of the Eurosystem’s monetary policy decisions to the real economy. Conclusion I would now like to conclude my remarks. I have shown that, since the global financial crisis, money markets have experienced important structural shifts. These changes likely supported the functioning of money markets during the COVID-19 pandemic. Money market activity remained comparatively resilient. Most importantly, the decisive policy response by the Eurosystem prevented localised tensions from turning into a broader liquidity crisis, thereby ensuring the smooth transmission of our monetary policy. Looking ahead, three developments deserve careful monitoring.