area banks. through these measures, the ecb aimed to mitigate the risk of systemic illiquidity in the euro area banking sector and to guarantee a steady flow of banking credit to euro area households and firms. impact of measures implemented by the ecb let me start with the impact of our measures on the eurosystem balance sheet. as in the case of other central banks, the size and complexity of the eurosystem balance sheet has significantly increased. in june 2007, just before the start of the crisis, total assets of the eurosystem amounted to around 10 % of area - wide gdp ( €913 billion ). by january 2009, the size of the balance sheet had almost doubled, reaching 19 % of gdp ( €1, 763 billion ). subsequent improvements in money market conditions have led to a reduction in the amount of total assets, but they remain at a higher level ( 16 % of gdp, or €1, 454 billion ) than in the pre - crisis period. the expansion of the eurosystem balance sheet was driven both by changes in the so - called autonomous factors, as well as by the introduction of non - standard measures. on the liability side, banknotes and government deposits have steadily increased during the past two years : banknotes changed from around €600 billion at the beginning of 2007 to €768 billion at the end of october 2009, while government deposits over the same time period went from around €50 billion to €140 billion. on the asset side, three factors may be distinguished, reflecting the non - standard measures. first, the banking system as a whole tended to demand more euro liquidity through refinancing operations with full allotment than actually needed to fulfil reserve requirements and liquidity needs from autonomous factors, and hence deposited the excess amounts back into the deposit facility of the eurosystem. second, the composition of the eurosystem balance sheet is affected by the covered bond purchase programme, whereby the purchases mainly imply a substitution effect, as they are likely to lead over time to a corresponding reduction of eurosystem refinancing operations. the importance of these two factors for the overall expansion of the eurosystem balance sheet can be measured very simply in the form of the recourse to the deposit facility. the daily recourse to the deposit facility peaked on 3 july 2009 with €316 billion, reflecting the high demand in the first 12 month long - term

eligible collateral set much earlier during the turmoil. this however did not reflect a lack of pro - activeness of the eurosystem, but the fact that it had always accepted a broad range of collateral. the steps taken by other central banks during the first year of the financial crisis can therefore be considered as convergence of collateral sets in the direction of the eurosystem ’ s framework. 4. outright purchases of covered bonds. the covered bond market, which has historically been an important source of funding for banks in large parts of the euro area, had suffered from the financial crisis, both in terms of primary and secondary market activity. the total sum allocated to the purchase programme – €60 billion, representing about 5 % of the outstanding eligible covered bonds – is deemed sufficient to significantly support activity in this important market, ensuring that the ecb acts as a catalyst for re - activating this market rather than as a market maker of last resort. during the first four months, the eurosystem bought over €20 billion worth of covered bonds, with the total of up to €60 billion being targeted for june 2010. compared with measures taken by other central banks, the measures implemented by the eurosystem were specifically targeted at the banking sector. the reason for concentrating on the banking sector stems from structural features of the euro area ’ s economy, particularly the fact that its financial system is predominantly bank - based. indeed, bank loans account for a much larger share of financing to households and firms in the euro area than in the united kingdom or in the united states, where non - bank financial institutions and capital markets provide important alternative sources of funds. for instance in 2007, the ratio of bank lending to the private sector relative to gdp amounted in the euro area to about 1. 5, compared with a ratio of 2 / 3 in the united states. at the same time, the ratio of outstanding debt securities issued by the euro area private sector relative to gdp was just over 3 / 4 in the euro area, while it was above 1. 5 in the united states. accordingly, the set of measures implemented by the eurosystem – our enhanced credit support programme – were designed with the objective of providing support to the banking sector by : ( a ) helping the functioning of the money market, ( b ) easing funding conditions for banks, and ( c ) improving market liquidity in segments of the private debt securities market ( specifically, the market for covered bonds ) that represent an important source of funding for euro