facility. you can see this on the right - hand side. non - bank and non - euro area entities are prepared to pay rates below the deposit facility rate, and below the rates offered by those with access to the facility, for two main reasons. first, because internal risk management rules restrict their choice of counterparties to those with the lowest credit risk. and, second, because alternative safe investments, such as short - term government bonds, are often even more costly. the changeover from eonia to the €str made visible the pricing impact of differences in who can hold central bank reserves. this also means that the €str is a better and more transparent indicator of prevailing market conditions than eonia, as it helps deliver a more comprehensive picture of the interactive effects of our actions and policy framework. but it also implies a possible risk that the €str might be less under our control than eonia was. changes in the €str are essentially a function of three main factors : the level of ecb policy rates, the level of excess liquidity and the distribution of this excess liquidity across sectors. all else being equal, a decline in the demand for liquidity services by non - banks – for example, due to a sudden increase in risk aversion – might lead to upward pressure on the €str at the same level of excess liquidity. also, a decline in excess liquidity can be expected to lead to faster upward pressure for €str, even in the absence of changes in policy rates. it is these factors that may be a cause of concern in the current context of interest rate volatility. but i would not be overly worried today for three main reasons. first, we are a long way from expecting any reductions in excess liquidity in the euro area. in fact, as of november, the ecb ’ s renewed net asset purchases of €20 billion per month will further increase excess liquidity. the governing council is committed to continue net purchases for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ecb interest rates, which in turn will depend on inflation robustly converging towards our aim. even beyond the end our net purchases, we will continue reinvesting the principal payments from maturing securities for an extended period of time, which will keep excess liquidity abundant. second, the experience of the federal reserve has highlighted that

##arding of central bank reserves for regulatory reasons becomes a matter of attention for policymakers insofar as it has the potential to adversely affect the transmission of monetary policy. this provides the background to understand the recent events in the us money market. as you can see on my next slide, excess reserves – the grey shaded area – currently stand well above $ 1 trillion – an extraordinary amount from a historical perspective and a level that, according to survey evidence, market participants had expected to be sufficient to keep market rates tied to policy rates, even when accounting for regulatory demand. nevertheless, and you can see this on the right - hand side more clearly, the secured overnight financing rate surged markedly towards the end of september, well above the federal reserve ’ s policy rates. even the effective federal funds rate briefly exceeded its target range. such volatility is clearly undesirable from a monetary policy perspective. short - term rates – and the relevant swap curves that are linked to them – are the key benchmark rates for the pricing of credit. the federal reserve therefore added more than $ 200 billion in additional overnight and 14 - day repo operations and announced additional purchases of us treasury bills at a pace of approximately $ 60 billion per month at least into the second quarter of 2020. these operations became necessary for a simple reason : because holdings of excess reserves in the us financial system are highly concentrated. you can see this on my next slide. according to data from the us federal deposit insurance corporation ( fdic ), 86 % of excess reserves are held by just 1 % of us banks. four banks alone account for 40 % of aggregate excess reserve holdings in the united states. whenever these intermediaries are reluctant, for regulatory or other reasons, to react to a shortage of liquidity elsewhere in the system – even in response to short - term shocks to the supply of and demand for liquidity – upward pressure on short - term rates becomes unavoidable. in addition, liquidity may be increasingly supplied by intermediaries which do not have access to central bank refinancing – a point to which i will return to later in my remarks. all in all, it is fair to say that the supply of liquidity has become less elastic in recent years. excess reserves are, however, much more concentrated in the united states compared with the euro area, despite the fact that there are almost twice as many banks in the united states than monetary financial institutions in the euro area. on this