Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the annual ECB Conference on Money Markets

Frankfurt, 7 November 2024

Excess liquidity in the euro area has declined measurably over the past two years. It has fallen by more than a third relative to its peak in 2022, and it dropped below €3 trillion about a month ago.

This decline in excess liquidity predominantly resulted from banks repaying the loans they had taken under the third series of targeted longer-term refinancing operations (TLTROs). More recently, the phasing-out of reinvestments of bonds maturing under the Eurosystem’s monetary policy portfolios has increasingly contributed to the decline.

As of January 2025, the Eurosystem will no longer reinvest any of its monetary policy bond holdings, leading to a run-off in our portfolios of around €40 billion per month.

The ECB is closely monitoring the impact of the decline in excess liquidity on financial markets, the banking system and the economy at…