The European Central Bank has unveiled a package of new liquidity measures in a bid to boost ailing bank lending in the euro area.
In addition to new cuts in eurozone interest rates, ECB chief Mario Draghi on Thursday unveiled a series of new measures to kick-start bank credit, which has been contracting for months.
"In order to support bank lending to households and non-financial corporations... we will be conducting a series of targeted longer-term refinancing operations (TLTROs)," Draghi told a news conference after the ECB's regular monthly policy meeting.
It already pumped vast amounts of liquidity into the banking system at the end of 2011 and the beginning of 2012 using so-called Long-Term Refinancing Operations (LTROs).
But at that time, banks did not lend the cash on to the small and medium-sized companies that form the backbone of the eurozone economy.
And the latest data showed that credit is still shrinking.
The new targeted LTROs will see the ECB lend to banks at low interest rates in a bid to encourage them to lend to households and non-financial corporations.
On top of this, Draghi said the ECB had undertaken "preparatory work" to conduct a form of US Federal Reserve-style bond-buying by purchasing asset-backed securities (ABS) from banks.
In addition, Draghi said the ECB would cease "sterilising" the liquidity injected from its Securities Markets Programme (SMP).
The programme involved the purchase of bonds from troubled "peripheral" euro zone countries and sterilising them meant that the ECB drained the same amount of liquidity from the money markets that the purchases injected into the markets.
"We decided on a combination of measures ... to support lending to the real economy," Draghi said.
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