S&P: "Banks are demanding more clarity from the ECB on liquidity tools."

S&P Global Ratings expects the European Central Bank (ECB) to conclude its quantitative tightening program before the end of 2026. If the program continues at its current pace, S&P expects the central bank's excess reserves to decline to match S&P's estimates for bank reserve requirements within the next 12 months.

As banks prepare to address the new liquidity landscape, they are likely to require clarity on the liquidity tools they will have at their disposal. Although the ECB has already announced its intention to introduce a structural bond portfolio and a new series of structural long-term refinancing operations (LTROs), the size and focus of these new tools remain unclear .

S&P expects the new structural bond portfolio to be significantly smaller and shorter-duration than previous ECB bond-purchase programs, and that the European Central Bank will maintain its focus on government bonds and continue to align purchases with its capital key .