Phenomenon observed in connection with reserve requirements. If, in the event of a temporary oversupply of central bank money, the overnight rate falls below the interest rate on the price at which a central bank provides short-term liquidity to banks (at the ECB, the main refinancing operation), banks have an incentive to frontload the reserve requirement. Central bank money (primary liquidity) flows back to the central bank in this way; the supply on the overnight money market falls, and this behavior on the part of the banks thus counteracts a further decline in the overnight money rate. – See frontloading, minimum reserve. – Cf. ECB Monthly Bulletin, October 2005, pp. 27 ff. (detailed explanation; overviews), . ECB Monthly Bulletin, August 2009, p. 37 ff. (effects of the first longer-term refinancing operation with a one-year maturity).

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