The ECB will offer banks 12-month funds on Oct. 26 and again in December after already sparse interbank lending markets dried up again on worries over financial institutions' exposure to sovereign debt.
"Interbank lending was starting to seize up and we're already starting to see some of that pressure ease," said James Dailey, chief investment officer of TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.
The one-year tenders will be pure liquidity additions that could result in 400 billion or 500 billion euros of excess by the end of the period, said RBS rate strategist Simon Peck.
That compares to around 230 billion euros currently. The abundance has let banks front-load their reserve requirements by around 120 billion euros, the largest amount since May 2010, according to Reuters data, while overnight deposits at the ECB are over 120 billion euros.
In general, markets have reacted positively to "growing signs that political policy makers are waking up to the task confronting them," said Cary Leahey, managing director and senior economist at Decision Economics in New York.
The spread between benchmark three-month Libor rates and equivalent maturity overnight rates has shrunk to around 65 basis points compared with 80 basis points in September.
It remains elevated, however, from the 20 basis point spread that prevailed in July.
Still, earlier this week, low demand at the ECB's first offer of long-term dollar funding since 2010 showed that most banks still have market access.
Banks borrowed $1.4 billion at the first of three dollar liquidity offerings aimed at alleviating pressures caused by increased reluctance to lend US currency to euro zone banks.
The take-up was below the $5 billion predicted by a Reuters poll of money market traders, but in line with analysts' view that the 1.08 percent rate and steep collateral haircuts made the ECB funding expensive relative to market rates.
Six banks bid for the three-month loans and one bidder borrowed $500 million at the regular seven-day tender.
In September, US money market funds' reluctance to lend to euro zone banks because of exposures to troubled Greece grabbed investors' attention, causing a spike in dollar funding costs and a sharp fall in banking shares.
Since then the cost of swapping euros into dollars -- a key barometer of market stress -- has eased off its most expensive levels, in part thanks to the ECB's liquidity provision.
The three-month euro/dollar cross currency basis swap last stood at around -92.5 basis points, compared to -115 points on Sept. 12.
The decision to implement three-month dollar tenders along with one-year euro liquidity offerings has capped the risk that banks could face a recurrence of the 2008 funding drought, justifying a modest easing of prices, analysts said.
In a note released on Monday, JP Morgan Securities observed that prime money market funds had cut their holdings of euro zone bank debt roughly in half since the end of May, allowing $237 billion of net exposures to mature.
But at the end of September, prime money market funds continued to hold $242 billion of euro zone bank credit, said Alex Roever, head of short-term rates strategy at JPMorgan Securities in New York.
The data showed the degree to which euro zone headline risk has influenced money market fund manager activity.
With over half of the remaining euro zone bank credit held by prime funds on track to mature before the end of October, Roever said even an "immediate resolution" to the European crisis might not head off further declines in money market fund holdings of euro zone bank debt.
The Eonia overnight lending rate also eased to 0.930 percent from the average rate of 1.05 percent seen in the maintenance period that ended on Tuesday.
"Now we have the continued commitment from the ECB to provide liquidity, we should see fixings continue to come down and start to move back to an environment where there is the expectation liquidity will remain high, leading to less volatile fixings," said RBS's Peck.
While the ECB's deposit rate of 0.75 percent will act as floor for the overnight rate, with 400 billion euros of excess liquidity the average rate could fall to between 0.80-0.85 percent, he added.
Benchmark three-month euro Libor rates were little changed at 1.505 percent.