ECB’s Schnabel: New Structural Portfolio to Be Tilted Toward Shorter-Dated Assets

6 November 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Executive Board member Isabel Schnabel on Thursday said the ECB’s planned structural securities portfolio should be weighted toward shorter-dated assets to preserve policy space, maintain stance neutrality and support financial soundness.

Speaking at the ECB’s Conference on Money Markets 2025, Schnabel said these principles would guide the Governing Council as it designs the Eurosystem’s future balance-sheet structure. “These factors suggest tilting the structure towards shorter-dated assets,” she said.

She said the ECB’s operational framework implied that the size of the balance sheet would become more responsive to banks’ liquidity demand and that its composition would increasingly reflect collateralized lending rather than securities holdings.

In the future, according to the sequence she outlined, a persistent and broad-based rise in the use of standard refinancing operations would come first, followed by structural measures starting with longer-term refinancing operations and later a structural securities portfolio.

Quantitative normalization was proceeding smoothly, with banks maintaining strong liquidity positions and abundant excess reserves, she said. The fixed-rate full allotment procedure ensured that liquidity was always available when banks needed it, she said.

The new framework, she said, allowed the ECB to decouple the pace of balance-sheet run-off from the control of short-term market rates. A narrow policy-rate corridor and full allotment would keep reserves sufficiently ample, she said, encouraging banks to use refinancing operations as part of regular liquidity management.

Schnabel said the longer-term refinancing operations would serve as a bridge between the current system and the future structure. Their introduction would depend on clear evidence that banks were persistently rolling over significant amounts of short-term borrowing to meet liquidity needs.

Such operations could take the form of variable-rate tenders with fixed quantities that could be adjusted over time, echoing pre-crisis practice, she said. Choosing the right tenor would balance the operational benefits of longer maturities against the loss of flexibility and the risk of crowding out market funding, she said.

Once legacy monetary-policy bond portfolios had declined sufficiently, the ECB would then begin building up the new structural securities portfolio, Schnabel said. Its launch would also depend on the liquidity contribution from national central banks’ non-monetary-policy holdings and the evolution of the net financial asset position, she said.

Passive balance-sheet run-off meant that point was still some way off, but that the portfolio would ultimately help meet the banking system’s structural liquidity needs alongside refinancing operations, she said. It would, she said, support implementation rather than steer the monetary stance.

Schnabel said shorter-dated assets would help the ECB remain agile in the face of shocks, minimize duration risk and preserve room for future asset purchases should monetary policy transmission again become impaired. Limiting exposure to long-term bonds would also reinforce the ECB’s financial resilience, she said.

The Governing Council would begin reviewing the key parameters of the operational framework in 2026, she reported, calling the balance-sheet transition “a transformative moment” that would shape how monetary policy is implemented in the decade ahead.