Constancio Says ECB Measures Helped Ease Money-Market Tensions

European Central Bank Vice President Vitor Constancio said policy initiatives implemented this year have succeeded in alleviating tensions in financial markets.

“As a result of the combined effect of the measures implemented by the ECB, the euro money market conditions improved during 2012, although its fragmentation remains still high,” Constancio said in a speech in Frankfurt today, according to a text provided by the ECB.

Financial-market tensions have eased after ECB President Mario Draghi committed to buy the bonds of distressed nations as long as they fix their budgets and reform their economies. The ECB also provided banks with more than 1 trillion euros ($1.3 trillion) in cheap three-year loans and softened rules on the collateral it accepts in exchange for the funds.

“A key lesson from the crisis is that we need to better understand and monitor the repo as well as the securities lending markets, given their importance for the efficient functioning of the financial system,” Constancio said.

While more detailed information provides regulators with “insights that may help them to identify trends in the build-up of risks over time,” increased transparency might also benefit central banks and guide policy decisions on collateral and risk control, he said.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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