Euro-area bond-market volatility has renewed debate over which tools could keep markets functioning in a wider crisis, with some analysts flagging the ECB’s repo operations—banks obtaining cash by pledging collateral—as a contingency liquidity source if conditions tighten. The ECB’s main refinancing operation (MRO) was not designed as a crisis facility and take-up has been low because market funding is often cheaper. Although market liquidity is still ample, banks may avoid the MRO due to stigma

Euro-area bond-market volatility has renewed debate over which tools could keep markets functioning in a wider crisis, with some analysts flagging the ECB’s repo operations—banks obtaining cash by pledging collateral—as a contingency liquidity source if conditions tighten. The ECB’s main refinancing operation (MRO) was not designed as a crisis facility and take-up has been low because market funding is often cheaper. Although market liquidity is still ample, banks may avoid the MRO due to stigma; analysts advise the ECB to consider lowering MRO financing costs, as the Bank of England has done, to make the tool more attractive and reduce that stigma.