The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
The European Central Bank doesn’t plan to announce a new round of free long-term loans to financial institutions after its policy meeting, according to people familiar with the issue.
Targeted longer-term refinancing operations (TLTROs) won’t be renewed for now, the people said, asking not to be named because the Governing Council’s deliberations are private. That stance could still change when policy makers meet.
TLTROs were started in 2014 and designed to offer loans of as much as four years to banks if they can show they’re boosting lending to companies and households. Euro-area institutions have borrowed 570 billion euros ($601 billion) so far, at interest rates that are currently zero and could be negative, and the decision not to renew the program will disappoint some of them. The final allotment under the current program is scheduled for March 23.
TLTROs have helped “reduce bank funding costs,†Giovanni Sabatini, the director general of the Italian banking association ABI, said in Frankfurt on Feb. 24. European Union rules requiring the gradual creation of layers of loss-absorbing securities “will probably cause funding costs for all banks to rise, so taken together another TLTRO could keep funding costs lower.â€
The program could still be renewed if economic conditions worsen. Governing Council member Vitas Vasiliauskas said in February that the ECB could use them to respond to a “drastic†reduction in lending, but stressed that they remain emergency instruments and shouldn’t become permanent features of the central bank’s monetary policy.
In a Bloomberg survey of economists, three-quarters of respondents said the ECB wouldn’t announce a new TLTRO round at Thursday’s policy meeting, though 17% said one would be announced at a later date.