, could be placed in the market. banks hoarded liquidity in order to be safe from unexpected outflows or the unknown extent of write - downs. because the usual market refinancing possibilities were blocked banks relied on highly rated collateral for their funding and the liquidity provided by the central bank. the spread between eonia and three - month euribor rose to the highest level ever at 70 bps and has remained high. unsecured trading in the money market beyond one week effectively ceased to exist. ii. central bank reaction function as liquidity retracted first from the credit markets, then money markets, intermediation vanishing, central banks had to move in : to restore orderly market conditions ; ensure the integrity of monetary transmission channels, and to ensure financial stability or prevent a systemic crisis. in view of the confidence crisis among market participants, due to uncertainty about financial individual exposures, the issues at stake were : 1 ) to have money market rates evolve close to the policy rates ; 2 ) to address the term structure problem to the extent that it was threatening the first issue ; 3 ) and thirdly to address the distributional problem of liquidity among market participants for reasons of financial stability. the somewhat more complex and elaborate toolbox of the eurosystem proved very valuable in this respect. - this applies to the instruments used to provide liquidity : the mro and ltro - this applies to minimum reserve features - this applies to the number of counterparties with direct access to central bank money - this applies finally to the range of eligible collateral let me say a word about each of these features of the eurosystem operational framework : 1. at moments of term structure difficulties and shortening of the liquidity constraints, it is of advantage to have both : one - week and three - month liquidity providing tenders conducted weekly and monthly. fine tuning operations and extraordinary additional tenders, according to standard procedures, allowed a commensurate response within a familiar context, rather than adding to prevailing uncertainty by introducing, in an emergency context, untested new facilities, instruments or procedures. 2. in monetary policy operations, the eurosystem grants direct access to liquidity to a large number of credit institutions. all euro - area institutions subject to minimum reserve requirements and which fulfil the relevant contractual or regulatory arrangements applied by their respective ncb, may access the standing facilities and / or participate in open market operations based on standard tenders. at the end of

side factors. the graph plots the net unweighted responses provided by the participating banks from the luxembourg bls sample. a positive “ net percentage ” indicates that, relative to the preceding quarter, banks have tightened their credit standards or reported higher loan demand by firms. conversely, if the respective line is below zero, this points to an easing of banks ’ credit standards or a fall in loan demand. as you can see in the chart, the survey results suggest that banks have been tightening credit standards since the onset of the financial crisis, making it more difficult for companies to finance their activities ; lending standards have been tightened in particular for large enterprises. at the same time, however, the period of high loan demand ended shortly after the onset of the financial crisis, and net demand even turned negative on several occasions. the slowdown in loan dynamics is therefore owing to the combined impact of tighter credit standards on the one hand and a deceleration or fall in loan demand on the other. you may have noticed that the slowdown in loan dynamics is lagging the tightening cycle : while the progression of loans to companies peaked in the third quarter 2008 before it slowed down rather rapidly, the bls suggests that banks were already tightening credit standards since the early stage of the crisis in the second half of 2007. in other words, the information on credit standards from the bls serves as a lead indicator. while the correlation between loan growth and credit standards is not perfect, the available evidence suggests that loan growth will stabilise shortly and subsequently pick up in the course of 2010. this prediction is in line with an ad hoc survey we carried out very recently. the survey questionnaire was sent to four banks with a combined share of roughly 50 % of the corporate credit market in luxembourg. in one of the questions, the four participating banks were asked how they expect corporate lending volumes to evolve. for consistency, the bls methodology has been used and the results are thus expressed as net percentages. however, the results of the ad hoc survey have been weighted according to the sample shares of the individual banks, while the bls results are unweighted owing to methodological reasons. as you can see in the chart, the survey results point to a moderate pickup in lending volumes, while lending to smes is even likely to accelerate considerably in the second half of 2010. new lending is expected to be the main driver behind the pickup in overall lending volumes, which also encompass loan repayments and write - downs.