Maintaining such a sizeable portfolio will exert lasting downward pressure on term premia. Chart 5: Outstanding quantity of duration: PSPP portfolio and other investors (EUR billions, 10-year equivalents)  6 / 12  BIS central bankers' speeches  Turning to liquidity creation, the roll-over of the portfolio resulting from our reinvestment policy will also continue to preserve abundant liquidity over the coming years. In the absence of reinvestments, and assuming that targeted longer-term refinancing operations (TLTROs) are repaid at maturity, the level of excess liquidity would decline significantly over the coming years (Chart 6). Chart 6: Evolution of excess liquidity under no re-investment counterfactual hypothesis 7 / 12  BIS central bankers' speeches  (EUR billions)  Our reinvestment policy will contribute to maintaining favourable liquidity conditions for an extended period of time, which helps anchor expectations regarding the evolution of very shortterm interest rates at the deposit facility rate. Ample volumes of excess reserves ensure that the overnight interest rate stays close to the floor of the interest rate corridor, which is provided by the deposit facility rate. This, together with forward guidance on the expected evolution of our policy interest rates, reduces rate uncertainty across maturities and thus adds to the 8 / 12  BIS central bankers' speeches  compression of term premia brought about by the duration extraction channel. Of course, our portfolio – even if kept constant – will tend to lose duration over time, as the securities held gradually mature.

“Requirements and Challenges of Rebuilding Banking Sector’s Capital and Liquidity Margins after lifting Stimulus Packages”  Two years ago today, the world was hit by coronavirus pandemic. Repercussions were far-reaching and severe posing challenges not only to the global markets but also the normal life that has been disrupted or almost disrupted. The pandemic had elements of both supply and demand shocks. On the supply side, closures in many economies around the world, and restrictions imposed on travel, gatherings, events and schools, as well as business interruptions led to supply chains disruption that had a negative impact on the growth of the global economy. This, in turn, affected the demand on energy that that witnessed a sharp fall, as brent crude oil plunged to 20-year low in April 2022 of USD 20 per barrel. The Purchasing Managers’ Index (PMI), concurrently, experienced a sharp decline during the same period reflecting deterioration of the operating environment for companies. In an effort to reduce the negative effects of the spread of the coronavirus pandemic and weather its repercussions and challenges, central banks around the worlds have taken exceptional measures. At the monetary policy level, interest rates have been cut to alltime low levels, reaching zero in some countries, liquidity injected exceptionally into the markets having eased the regulatory requirements to ensure the continued inflows, while fiscal policy stimulated economies by providing financial facilities and aids including payment moratoriums and extending financial aids to the affected segments.