types of open market operations are longer term refinancing operations, fine - tuning operations and structural operations. for more information, see european central bank, the monetary policy of the ecb, 2011, 104 - 108. keynote _ governor _ aedbf _ 30 _ nov _ 2018 _ final. docx 3. secondly, the eurosystem implements monetary policy by setting the interest rates on its standing facilities on the basis of article 18. 1, second indent of the statute of the escb. standing facilities provide or absorb liquidity with an overnight maturity on the initiative of counterparties. two standing facilities are available to commercial banks : the marginal lending facility ( to obtain intraday credit to cover shortages in liquidity ) and the deposit facility ( to make overnight deposits of excess liquidity ). thirdly, according to article 19. 1 of the statute of the escb, the ecb may require commercial banks to hold minimum reserves ( or compulsory deposits ) on accounts with the eurosystem central banks. the intent of the minimum reserve system is to create ( or enlarge ) a structural liquidity shortage : an increase of minimum reserves entails a reduction of liquidity in the market and vice versa. the reserve requirement of each institution is determined in relation to elements of its balance sheet. 2. 2 money creation and fractional reserve banking so how, then, is money created in practice? let me clarify this process through the monetary policy instrument of the minimum reserves. commercial banks are limited in the total amount they can loan to customers by, among others, their required minimum reserve ratios which oblige a commercial bank to keep a minimum, predetermined percentage of its deposits in an account with the central bank. this is called the system of fractional reserve banking because commercial banks are required to only hold a fraction of their total deposits in a central bank account. in practice, if the central bank imposes a required minimum reserve ratio of, say, 0. 10, then each commercial bank is obliged to keep at least 10 % of its total deposits as reserves, i. e. in the account it has with the central bank. the process of money creation can be illustrated with the following simplified example : when a person deposits 100 eur in a commercial bank, this bank will keep 10 eur as reserves in the central bank. to make a profit, the commercial bank loans the remaining 90 eur to another customer. this customer spends the 90 eur

mario draghi : ecb press conference – introductory statement introductory statement by mr mario draghi, president of the european central bank, and mr vitor constancio, vice - president of the european central bank, frankfurt am main, 21 january 2016. * * * ladies and gentlemen, first of all let me wish you a happy new year. the vice - president and i are very pleased to welcome you to our press conference. we will now report on the outcome of today ’ s meeting of the governing council, which was also attended by the commission vice - president, mr dombrovskis. based on our regular economic and monetary analyses, and after the recalibration of our monetary policy measures last month, we decided to keep the key ecb interest rates unchanged and we expect them to remain at present or lower levels for an extended period of time. regarding our non - standard monetary policy measures, the asset purchases are proceeding smoothly and continue to have a favourable impact on the cost and availability of credit for firms and households. taking stock of the evidence available at the beginning of 2016, it is clear that the monetary policy measures that we have adopted since mid - 2014 are working. as a result, developments in the real economy, credit provision and financing conditions have improved and have strengthened the euro area ’ s resilience to recent global economic shocks. the decisions taken in early december to extend our monthly net asset purchases of €60 billion to at least the end of march 2017, and to reinvest the principal payments on maturing securities for as long as necessary, were fully appropriate. they will result in a significant addition of liquidity to the banking system and will strengthen our forward guidance on interest rates. yet, as we start the new year, downside risks have increased again amid heightened uncertainty about emerging market economies ’ growth prospects, volatility in financial and commodity markets, and geopolitical risks. in this environment, euro area inflation dynamics also continue to be weaker than expected. it will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early march, when the new staff macroeconomic projections become available which will also cover the year 2018. in the meantime, work will be carried out to ensure that all the technical conditions are in place to make the full range of policy options available for implementation, if needed. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp growth was confirmed