Banks snap up zero-interest ECB loans

Frankfurt am Main / AFP

Eurozone banks increased uptake of zero-interest loans from the European Central Bank in December, data showed on Thursday, as part of a lending scheme to ease access to credit for households and businesses.
Banks borrowed 62.2 billion euros ($65.1 billion) in total, compared with September’s figure of 45.3 billion. Subtracting some 14.2 billion euros banks used to repay old loans, the net amount issued by the ECB stood at 48 billion euros — up from 34 billion in the previous round.
The December round of the scheme saw 200 banks take part, compared with 249 in September.
ECB policymakers announced a one-year extension of its quarterly Targeted Long-Term Refinancing Operations (TLTRO) scheme in March 2016, with the first round issued in June.
Banks can borrow at zero interest in a programme designed to push banks to lend on the cash to companies and households in the real economy.
The ECB hopes to incentivise lending by offering the banks lower interest rates the more loans they issue.
Rates the banks are offered can go as low as the central bank’s deposit rate of interest — currently -0.4 percent — meaning that the ECB pays them to take its money.
Policymakers insist that along with its other measures, the TLTRO programme is making access to credit easier for the real economy.
ECB figures released in late November showed that loans to households had grown by 1.9 percent in October compared with the same month in 2015, while loans to businesses grew by 1.7 percent.
TLTRO 2 was part of a battery of measures launched by the Frankfurt institution in March to prop up a struggling eurozone economy.
It was introduced alongside an increase in the central bank’s “quantitative easing” bond-buying programme to 80 billion euros from 60 billion euros per month and a further drop in interest rates.
The ECB opted last week to reduce its monthly purchases back to 60 billion from April, while leaving interest rates and the TLTRO programme
unchanged.