ECB's Very Attractive TLTRO II loans

Published 03/18/2016, 07:50 AM
Updated 05/14/2017, 06:45 AM

The ECB's new TLTRO II provides very cheap bank funding with a long maturity and no mandatory early repayments. The TLTRO II has a fixed size and maturity while the price of the loans varies with eligible net lending

The lending benchmark should not be difficult to beat, thus the demand for the TLTRO II loans from banks should be high. For most core countries, the benchmark is set at zero, while a large majority of the periphery countries can continue with declining lending and still get an interest rate on the TLTRO II loans as low as the deposit rate

The TLTRO II should clearly support the supply side of a further ease in the loan conditions to the private sector. From the demand side, we expect enterprises and consumers will continue to increase their demand for loans and credits, which will support the effectiveness of the TLTRO II loans.

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