The Eurosystem’s lending to euro area banks related to monetary policy operations (i.e. via repos and the “marginal lending facility”) has risen from €408 billion in April to €589 billion as of last week but remains well below a June 2010 peak of €870 billion. This lending, however, has been supplemented by an expansion of other forms of support – “emergency liquidity assistance” operations, other lending to banks and sovereign bond purchases under the securities markets programme (SMP). Total support is now back at the previous high and should continue to expand over coming weeks.

The following changes to the Eurosystem’s balance sheet have occurred since June 2010:

• Lending related to monetary policy operations has fallen by €281 billion.

• Ireland and Greece (at least) have instituted “emergency liquidity assistance” programmes, under which local banks borrow against inferior collateral at a penal rate. These programmes have been recorded under “other assets” on the respective central bank balance sheets. Eurosystem-wide “other assets” have expanded by €93 billion since June 2010.

• “Other claims on euro area credit institutions denominated in euro” have risen by €47 billion. The form and purpose of this lending is not disclosed but it could reflect “covert” support – an increase on the recent scale last occurred in September 2008 following Lehman’s collapse.

• The ECB has expanded its SMP sovereign bond holdings by €132 billion, with securities probably mostly purchased from banks. It has also recently embarked on a second covered bond purchase programme (CBPP2), intended to reach €40 billion by October 2012.

Aggregating the above categories gives a proxy for total support – this has risen from €886 billion in April to €1265 billion as of last week, close to a €1275 billion June 2010 record. A further significant expansion is likely, reflecting ongoing sovereign and covered bond purchases and likely strong demand for funds at the 13-month repo operation scheduled for 21 December.