NEW YORK, March 27 (Reuters) - The European Central
Bank's balance sheet will shrink quickly in the coming years but
it is unlikely to fall back to its level prior to the global
financial crisis, so a new approach to liquidity management is
needed, ECB board member Isabel Schnabel said.
Among alternatives, the approach used by the Bank of
England, in which banks themselves determine the amount of
liquidity they want to hold, may be suitable as it alleviates
the drawbacks of other systems.
"Under this approach, the central bank offers regular
collateralised lending operations to ensure that any shortfall
in banks' demand for reserves is replenished as quantitative
tightening proceeds," Schnabel, who is responsible for the ECB's
market operations said in a speech
(Reporting by Michael Derby, Writing by Balazs Koranyi, Editing
by Francesco Canepa)
Reuters Messaging:
balazs.koranyi.thomsonreuters.com@reuters.net))
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