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European Central Bank Forecasts Reduction In Excess Liquidity Among Banks

by THEFUTURE.TEAM

July 29, 2024

In a pivotal move, the European Central Bank (ECB) has projected a notable reduction in the excess liquidity currently held by banks, as detailed in a recent report authored by Tom Hudepohl, Pamina Karl, Tobias Linzert, Benoit Nguyen, Marta Skrzypińska, and Lia Vaz Cruz. This anticipated decline will likely necessitate increased market-based financing, particularly through secured funding instruments such as repurchase agreements (repos) and covered bonds, to redistribute liquidity effectively across the Eurozone’s banking system.

Liquidity Redistribution and Market Stability

The ECB’s analysis highlights the uneven distribution of liquidity within and between countries, which may create disparities in financial stability. The reduction in excess liquidity, which stood at €3.2 trillion in May 2024 following a peak of €4.7 trillion in November 2022, will require banks to engage more actively in liquidity management practices. This redistribution is critical for maintaining short-term money market rates near the deposit facility rate, thereby limiting volatility.

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Impact on Monetary Policy and Financial Markets

To address these challenges, the ECB has introduced adjustments to its operational framework. From September 2024, the margin between the Main Refinancing Operations (MRO) rate and the deposit facility rate will be lowered to 15 basis points. This change aims to encourage banks to participate in weekly refinancing operations, ensuring smooth implementation of monetary policy and reducing potential liquidity shortages.

The report underscores the importance of the repo market as a vital channel for liquidity allocation. Increased activity in this market indicates banks’ reliance on secured transactions to manage their liquidity needs efficiently.

Broader Economic Implications

The ECB’s measures reflect a broader strategy to normalise its balance sheet post-pandemic while ensuring adequate liquidity support for banks. This approach is designed to uphold favourable financing conditions and support economic recovery, aligning with the ECB’s mandate to maintain price stability.

As the banking sector adjusts to a lower liquidity environment, the emphasis will be on effective risk management and adherence to new regulatory standards. The ECB’s proactive steps in modifying its operational framework and promoting market-based liquidity solutions are crucial for sustaining financial stability and ensuring the smooth transmission of monetary policy.

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Competition Authority Launches Comprehensive Review of ExxonMobil Cyprus Acquisition

by THEFUTURE.TEAM

September 16, 2025

Investigation Initiated Over Strategic Acquisition

The Competition Protection Authority has commenced a thorough investigation into the acquisition of ExxonMobil Cyprus Limited’s share capital by Petrolina Holdings Public Ltd through Med Energywise Ltd. This inquiry was formally initiated following a session held on 10 September 2025, after an in-depth review of the pertinent report by the Authority’s Service.

Concerns Over Market Compatibility

Authorities have expressed serious concerns regarding the compatibility of the transaction with established competitive practices. The review indicates that the acquisition may affect several critical petroleum markets, both horizontally and vertically, thereby raising the potential for adverse impacts on market dynamics.

Horizontal Market Dynamics

On the horizontal front, potential effects have been identified in the import market for petroleum products, as well as in both wholesale and retail distribution channels of these products. The consolidation is believed to increase the risk of price rises and coordinated actions, given the direct competitive proximity between Petrolina and ExxonMobil.

Vertical and Adjacent Market Implications

Vertical aspects of the merger are also under close scrutiny. The new entity could restrict competitors’ access to critical infrastructure such as storage facilities, supply channels, and customer bases. These restrictions could further affect the onshore distribution of fuels, the wholesale market for lubricants, and specialized technical services connected with fuel station operations.

Local Market Considerations

Particular attention is being paid to the potential concentration in the retail fuel market. The investigation suggests that a reduced competitive landscape within a four-kilometer radius of the companies’ fuel stations could lead to diminished local competition, adversely impacting consumer prices and options.

Next Steps and Industry Impact

The Competition Protection Authority, which reached a unanimous decision to pursue a full investigation, remains open to submissions from parties that might be affected by this transaction, as mandated by current legislation. A final decision is expected within four months upon receipt of all necessary evidence, potentially setting a significant precedent for future market consolidation cases in the energy sector.