Excess liquidity remains ample in the euro area. Recent upward pressure on rates in some segments of the money market reflects, by and large, a reduction in collateral scarcity, due to the increased bond issuance by governments and the reduced Eurosystem market footprint. The improved availability of collateral has helped to significantly improve market functioning in the euro area. In addition, increasing market-based funding activity and growing signs of redistribution of reserves across banks and borders suggest that banks have started adapting to an environment with less ample reserves. We expect this process to continue as excess liquidity declines further, with banks increasingly sourcing liquidity through our standard refinancing operations, as these constitute an integral part of a smooth implementation of monetary policy in our operational framework.