Amid the turbulence in credit markets, and in particular structured credit markets, after the summer of 2007 the issuance of commercial mortgage-backed securities (CMBS) came to a halt in Europe, eventually resuming at more modest issuance volumes. With lowered investor appetite for these securities, opportunities for banks to spread commercial property loan exposures were reduced. This, in turn, reduced their willingness to lend for commercial property development and ownership. In addition, it led to revenue decline and exposures to "hung loans" for investment banks that originated commercial property loans with the aim of distributing them as structured credit products. These negative developments came at a time when commercial property markets in the euro area – at least in some countries – started to show signs of deterioration. Thus, the structured commercial mortgage market and the direct commercial property ownership and development market have the potential to negatively affect each other. This box provides a brief overview of the CMBS market in Europe and it identifies the main risk propagation channels from this market from a euro area financial stability viewpoint. One of the most important features of the recent financial turmoil has been wide money market spreads. A commonly used measure of the risk premium in interbank markets is the spread between unsecured deposit and EONIA swap rates (the deposit-OIS spread). In the euro area, deposit rates are indicated by EURIBOR fixings, based on a trimmed average of unsecured deposit quotes provided by a panel of up to 43 banks, while overnight-indexed swaps (OIS) serve as a proxy for overnight rate expectations. These spreads, which before the inception of the financial turmoil hovered below ten basis points for maturities of up to twelve months and below five basis points for shorter maturities, reached record levels in recent months. This box outlines the evolution of these spreads and examines the information they may contain regarding credit and liquidity concerns. Standing facilities are designed to provide and absorb overnight liquidity and are aimed at bounding overnight market rates. Two standing facilities are available to eligible Eurosystem counterparties on their own initiative, subject to their fulfilment of certain operational access conditions. Counterparties can use the marginal lending facility to obtain overnight liquidity from the national central banks (NCBs) against eligible assets and can use the deposit facility to make overnight deposits with the NCBs. The interest rate on the marginal lending facility normally provides a ceiling and the interest rate on the deposit facility a floor for the overnight interest rate. Under normal circumstances, there are no restrictions on the access of counterparties to these facilities, apart from the requirement to present sufficient underlying assets when using the marginal lending facility. Counterparties must fulfil certain eligibility criteria defined with a view to giving a broad range of institutions access to the standing facilities, whilst ensuring that certain operational and prudential requirements are taken into account: institutions must be subject to the Eurosystem minimum reserve system; they must be financially sound (subject to supervision by national authorities); and they must satisfy operational criteria defined by the respective NCB. The end of the calendar year typically takes on a particular significance for financial institutions and it is also often associated with changes in the economic behaviour of other market participants. Events in the second half of 2007 created an environment of great uncertainty as the year-end approached and, as a consequence, tensions in money markets were much more acute than is usually the case at this time. This box offers a brief overview of typical year-end and quarter-end considerations. Non-financial corporate lending in the euro area has expanded strongly since 2002, and reached a nominal annual growth rate of 15% in March 2008. In spite of the tensions in global credit markets, bank lending to euro area non-financial corporations has thus remained strong, suggesting that firms, so far, have weathered the turbulence well. The resilience in loan growth observed up to early 2008 is unusual as financial institutions’ lending criteria tend to tighten in periods of financial stress, resulting in lower credit growth and a slowdown in economic activity. Looking ahead, ECB bank lending survey data show that the trend towards euro area banks tightening their credit standards on loans to enterprises that began in late 2007 continued in early 2008. This may, in due course, indicate a turn in the corporate credit cycle, as it becomes more costly and difficult for non-financial corporations to gain access to bank financing. This box evaluates the state of the current corporate credit cycle by comparing observed loan growth with implied credit growth suggested by a simple model. In assessing the potential impact that the strains in financial markets may have on euro area and US non-financial companies, firms’ leverage and the cost of finance play a key role. To this end this box first examines some of the differences between euro area and US firms with regard to their reliance on bank and market-based sources of financing. It then goes on to assess how these differences together with higher financing costs may impact on the balance sheets of the enterprises. The macroeconomic environment can be an important factor underlying the stability of the financial system, affecting the creditworthiness of firms and households, the buoyancy of financial markets, and the profitability and stability of financial institutions. As a corollary, the macroeconomic environment can also be an important exogenous source of risk for financial stability: an adverse shock – or constellation of shocks – can directly impair households’ and firms’ ability to honour their financial obligations. It may also be an indirect source of imbalances that build up endogenously over time. Although the form of such vulnerabilities varies – including excessive investment, debt accumulation, rapidly rising asset prices, or widening current account deficits – the mechanism tends to be similar. It is usually associated with a misperception of future returns or risk that leads to an inter-temporal misallocation of resources and a build-up of imbalances that weakens the resilience of the system to future adverse disturbances.