Chapter 4 - Standing Facilities
4.1 The Marginal Lending Facility
a. Type of instrument
Counterparties may use the marginal lending facility to obtain overnight liquidity from national central banks at a pre-specified interest rate against eligible assets (as specified in Chapter 6). The facility is intended to satisfy counterparties' temporary liquidity needs. Under normal circumstances, the interest rate on the facility provides a ceiling for the overnight market interest rate. The terms and conditions of the facility are identical throughout the euro area.
b. Legal nature
The national central banks may provide liquidity under the marginal lending facility either in the form of overnight repurchase agreements (i.e. the ownership of the asset is transferred to the creditor while the parties agree to reverse the transaction through a re-transfer of the asset to the debtor the next business day) or as overnight collateralised loans (i.e. an enforceable security interest is provided over the assets but, assuming fulfilment of the debt obligation, the ownership of the asset is retained by the debtor). Further provisions for repurchase agreements are specified in the contractual arrangement applied by the respective national central bank. Arrangements for providing the liquidity in the form of collateralised loans take account of the different procedures and formalities required to enable the establishment and subsequent realisation of a relevant interest in the collateral (a pledge) which apply in different jurisdictions.
c. Access conditions
Institutions fulfilling the general counterparty eligibility criteria specified in Section 2.1 may access the marginal lending facility. Access to the marginal lending facility is granted through the national central bank in the Member State in which the institution is established. Access to the marginal lending facility is granted only on days when the relevant national RTGS system and securities settlement system(s) are operational.
At end-of-day, counterparties' intraday debit positions on their settlement account with the national central banks are automatically considered to be a request for recourse to the marginal lending facility. The procedures for end-of-day access to the marginal lending facility are specified in Section 5.3.3.
At any time during the business day before 6 p.m. (ECB time), counterparties may access the marginal lending facility by sending a request to the relevant national central bank. In the request, the amount of credit is to be stated and, if underlying assets for the transaction are not already pre-deposited with or pre-delivered to the national central bank, the underlying assets to be delivered for the transaction are to be specified.
Apart from the requirement to present sufficient underlying eligible assets, there is no limit to the amount of funds to be advanced under the marginal lending facility. However, the ESCB may limit or suspend individual counterparties' access to the facility in exceptional circumstances.
d. Maturity and interest terms
The maturity of credit extended under the facility is overnight. For counterparties directly participating in TARGET, the credit is repaid at the opening of the national RTGS system and the national securities settlement system on the following business day. The interest rate is announced in advance by the ESCB and is calculated as a simple interest rate with the day-count convention "actual/360". The ECB may change the interest rate at any time, with effect not earlier than the following business day. Interest under the facility is payable each business day with the repayment of the credit.
e. Suspension of the facility
Access to the facility is granted only in accordance with the objectives and general monetary policy considerations of the ECB. The ECB may adapt the conditions of the facility or suspend it at any time.
4.2 The Deposit Facility
a. Type of instrument
Counterparties can use the deposit facility to make overnight deposits with national central banks. The deposits are remunerated at a pre-specified interest rate. Under normal circumstances, the interest rate on the facility provides a floor for the overnight market interest rate. The terms and conditions of the deposit facility are identical throughout the euro area.
b. Legal nature
The overnight deposits accepted from counterparties are remunerated at a fixed rate of interest. No collateral is given to the counterparty in exchange for the deposits.
c. Access conditions
Institutions fulfilling the general counterparty eligibility criteria specified in Section 2.1 may access the deposit facility. Access to the deposit facility is granted through the national central bank in the Member State in which the institution is established. Access to the deposit facility is granted only on days when the relevant national RTGS system is operational.
At any time during the business day before 6.30 p.m. (ECB time), counterparties may access the deposit facility by sending a request to the relevant national central bank. In the request, the amount to be deposited under the facility is to be stated. Furthermore, the ECB may decide to establish a procedure for counterparties' automatic end-of-day access to the deposit facility.
There is no limit to the amount a counterparty may deposit under the facility.
d. Maturity and interest terms
The maturity of deposits under the facility is overnight. For counterparties participating directly in TARGET, deposits held under the facility mature at the opening of the national RTGS system on the following business day. The interest rate is announced in advance by the ESCB and is calculated as a simple interest rate with the day-count convention "actual/360". The ECB may change the interest rate at any time, with effect not earlier than the following business day. Interest on the deposits is payable each business day at the maturity of the deposit.
e. Suspension of the facility
Access to the facility is granted only in accordance with the objectives and general monetary policy considerations of the ECB. The ECB may adapt the conditions of the facility or suspend it at any time.
ECB - European Central Bank