##ro. third, a new covered bond purchase programme ( cbpp2 ) will be launched. under the cbpp2 the eurosystem will purchase, in both primary and secondary markets, covered bonds for a total value of eur 40 billion over a period on one year beginning in november 2011. further details on the modalities of cbpp2 will be announced after the governing council meeting of 3 november 2011. 4. challenges ahead after four years of financial market turmoil, market conditions in many countries, including the euro area, remain exceptionally fragile. in response, the eurosystem continues to provide support to euro area money markets in the ways i have just described. such support should prove beneficial if three principles are followed : it should be timely, targeted and temporary. the ecb ’ s interventions have been timely since the outbreak of the crisis, in the sense that on the day in which tensions from the us sub - prime mortgage market first spilled over to euro money markets, the ecb reacted quickly by temporarily offering unlimited amounts of liquidity to the banking sector, to avoid that liquidity tensions would spill over to other segments of the financial markets and to maintain control over short - term unsecured interest rates. more recently, the decision to phase out, or to introduce new non - standard measures, was also taken in accordance with what was judged to be appropriate under the market conditions that prevailed at the time. the eurosystem ’ s response has also been targeted. our response has, for example, focused on the banking sector, because this sector continues to play a major role in euro area financial markets, in particular for the transmission of monetary policy. finally, the ecb has repeatedly emphasized the temporary nature of its non - conventional measures. indeed, maintaining measures which have outlived their usefulness for too long could trigger other types of imbalances which could contribute to a new crisis in the future. for example, if support for the banking sector is provided for too long, banks ’ incentives to resume market - based funding activities may suffer and markets may become increasingly dependent on central bank funding. incentives for banks to monitor each other may also be lost, and this could result in further market inefficiencies. for these reasons, the eurosystem tries to keep its interventions in financial markets at a low level that is still commensurate with its main objective. this is the so - called market principle. bis central bankers ’ speeches the eurosystem will

portugal and, eventually, also spain and italy. sovereign bond markets in an increasing number of euro area countries began to become dysfunctional. this weakened the transmission channel of monetary policy decisions to financial markets and broader financing conditions in the economy. in order to address this problem, on 10 may 2010, the ecb launched the securities market programme ( smp ) under which it conducts outright purchases of euro area debt securities in the secondary market. although the smp remained inactive for a period of around four months between april and august 2011, following renewed tensions in euro area sovereign bond markets, the ecb announced on 7 august 2011 that it would resume purchases under this programme. this took place after the announcement of new fiscal and structural policy measures by the italian and spanish governments. a key distinguishing feature of asset purchases made under the smp is that their liquidity impact has been sterilised through the conduct of weekly liquidity absorbing operations. bis central bankers ’ speeches overall, there has been no net injection of central bank liquidity to the market as a consequence of these operations. these measures and their objectives are therefore fundamentally different from quantitative easing. on 6 october the ecb announced a number of important additional non - standard measures. first, the governing council decided to conduct two new longer - term refinancing operations ( ltros ), with maturities of 12 and 13 months, with the fixed - rate full - allotment tender procedures. the rate in both operations will be fixed at the average rate of the main refinancing operations over the life of these respective ltros. second, main refinancing operations ( mros ) will continue to be conducted with fixed - rate full - allotment tender procedures for as long as necessary, and at least until 10 july 2012. this procedure will also remain in use for the special - term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as needed, and at least until the end of the second quarter of 2012. the fixed rate in these special - term refinancing operations will be the same as the mro rate prevailing at the time. the six ltros with maturities of three - months that will be conducted in the first half of 2012 will also be conducted with fixed - rate full - allotment tender procedures. the rates in these three - month operations will be fixed at the average rate of the mros over the life of the respective lt