Brussels, 18/09/2014 (Agence Europe) - More than 250 financial entities have been lent €82.6 billion in cheap loans aiming to stimulate the financing of the economy, the ECB announced on Thursday 18 September.
These targeted longer-term refinancing operations (TLTROs) aim to inject more cash into the real economy and, ultimately, to increase the excessively low levels of inflation in the eurozone (0.4% in August).
Located in the lower range of forecasts, this level of lending was described as disappointing by observers, as the ECB had put an envelope of up to €400 billion on the table for the September and December tenders. This low level could testify to low current demand for lending in Europe. The banks may also have adopted a wait-and-see attitude and will leap into action when the next loan tender is launched in December, once the results of the assessment of the banking sector solidity tests currently being carried out by the ECB and the European Banking Authority (EBA) are announced at the end of October and in light of the reimbursements still to be made by the banks which took part in the TLTRO operations of 2011.
Under the TLTRO operation, banks take out cheap loans over four years as long as the value does not exceed 7% of their outstanding loans to non-financial businesses, not including mortgage loans (reference value of April 2014). The eligible banks which have not reached this threshold in September will be able to take out further loans in December up to the limit in place. In 2015 and 2016, the banks will be able to borrow even more if they can demonstrate that this cheap liquidity has allowed them to increase the level of their loans to SMEs. If that is not the case, the banks will have to repay the borrowing in two years instead of four.
The 'TLTRO' operation will be added to by the launch of a programme for the massive buy-back of asset-backed securities (ABS) and covered bonds (see EUROPE 11155). (MB)